Problem5-year treasury bonds yield 55 the inflation premium, Ask an Expert

Finance

Problem:

5-year Treasury bonds yield 5.5%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year bonds is 0.4%.

Required:

Question: What is the real risk-free rate, r*?

Answer

A. 2.59%

B. 2.88%

C. 3.20%

D. 3.52%

E. 3.87%

Note: Provide support for your rationale.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91148488

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