Estimate the nominal interest rate for a new issue of a bond. The current 3-month Treasury bill rate is 4,50% and the inflation rate is 1,50%. The 30-year Treasury bond rate is 7,50% and the 30-year corporate bond rate is 9,00%. The liquidity-risk premium will be greater than zero, however, because the secondary market for the firm's bonds is more uncertain. It is estimated at 100 basis points. Provide your answer up to 2 decimal places Real risk-free interest rate: % Inflation premium: % Default-risk premium: % Maturity-risk premium: Liquidity-risk premium: % Nominal interest rate: %

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 10P
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Estimate the nominal interest rate for a new issue of a bond.
The current 3-month Treasury bill rate is 4,50% and the inflation rate is 1,50%.
The 30-year Treasury bond rate is 7,50% and the 30-year corporate bond rate is 9,00%.
The liquidity-risk premium willI be greater than zero, however, because the secondary market for the firm's bonds is more uncertain. It is
estimated at 100 basis points.
Provide your answer up to 2 decimal places
Real risk-free interest rate:
%
Inflation premium:
%
Default-risk premium:
%
Maturity-risk premium:
%
Liquidity-risk premium:
%
Nominal interest rate:
%
Transcribed Image Text:Estimate the nominal interest rate for a new issue of a bond. The current 3-month Treasury bill rate is 4,50% and the inflation rate is 1,50%. The 30-year Treasury bond rate is 7,50% and the 30-year corporate bond rate is 9,00%. The liquidity-risk premium willI be greater than zero, however, because the secondary market for the firm's bonds is more uncertain. It is estimated at 100 basis points. Provide your answer up to 2 decimal places Real risk-free interest rate: % Inflation premium: % Default-risk premium: % Maturity-risk premium: % Liquidity-risk premium: % Nominal interest rate: %
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