What is the real risk-free rate of return

Assignment Help Financial Management
Reference no: EM132822381

Problem - REAL RISK-FREE RATE - You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.8%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:

Inflation premium = 3.25%

Liquidity premium = 0.6%

Maturity risk premium = 1.85%

Default risk premium = 2.15%

On the basis of these data, what is the real risk-free rate of return?

Reference no: EM132822381

Questions Cloud

Evaluate the social contexts and demands for jian : Identify the steps you would take to formally evaluate the social contexts and demands for Jian. Identified steps should consider Jian's overall communication.
Tradeoffs to reducing cumulative total costs : Explain how you could use the PDCA cycle to reduce the Cumulative Total Cost. What are the tradeoffs to reducing Cumulative Total Costs?
What is the default risk premium on the corporate bond : Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk premium on the corporate bond
Prepare a summary journal entry to record raw material used : Prepare a summary journal entry to record raw material used. In January Reyes tool and die requisition raw material for production as follow: job 1 $1900
What is the real risk-free rate of return : REAL RISK-FREE RATE - You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.8%. What is the real risk-free rate of return
Compute the number of units that would have to be sold : Compute the number of units sold in 2019. Compute the number of units that would have to be sold in 2020 to reach the stockholders' desired profit level.
Differences do you note between the two systems : What common components do you notice that their systems share? What differences do you note between the two systems?
What kinds of evidence does the article rely on : Choose course reading The Mexican Revolution (attached below) and check the bibliography, footnotes, or endnotes. Find a published source whose title looks.
Explain the manual processes and flat-file systems : Explain the manual processes, flat-file systems, the database approach, the resources, events, agents (REA) model; and enterprise resource planning

Reviews

Write a Review

Financial Management Questions & Answers

  Usefulness of derivatives in practice is least accurate

Which of the following statements about the usefulness of derivatives in practice is least accurate?

  The two firms if you were unbiased advisor

What swap strategy would you suggest to the two firms if you were an unbiased advisor? What is the net cost to each party in the swap?

  Compute the estimated real interest rate

Compute the estimated real interest rate, as a number, with 0.001 precision.

  About the cost of equity to not-for-profit businesses

Which of the following statements about the cost of equity to not-for-profit businesses is most correct?

  Calculate equal annual retirement payment

Calculate the equal annual retirement payment for a 20 year retirement after completing a 46 year employment.

  Who needs to consider obtaining life insurance

Who needs to consider obtaining life insurance?

  What is the yield of maturity

What is the yield of maturity of a 4-year bond that pays a coupon rate of 6.23 percent per year, has a $1,000 par value, and is currently priced at $990?

  Treasury bond-what is the present value of the bond

A 10-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 6.5% every six months. The semi annually compounded interest rate is 5.0%. What is the present value of the bond?

  Explain the ways in which the stocks could differ

Using the Gordon Growth model as your stock pricing framework, explain the ways in which the stocks could differ so as to justify their different market prices

  Estimate of the population mean examination score

What is the 95% confidence interval estimate of the population mean examination score if a sample of 200 applications provided a sample mean = 935.

  What would be cost of new equity

New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity?

  Interest rate risk of coupon bond is higher when bond

Holding other factors constant, the interest rate risk of a coupon bond is higher when the bond's:

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd