The real risk-free rate of interest is 1.57% at the beginning of 2021. Inflation is expected to be 2% in 2021, jump to 4.00% in 2022, and run at 3% in 2023. A maturity risk premium is expected to be 0.37% per year to maturity. A liquidity premium on corporate bonds issued by small companies will continue to be 0.50%, regardless of their maturities. What should the interest rate on a 3-year Treasury security be at the beginning of 2021? Group of answer choices 5.85% 5.31% 5.54% 6.18% 5.68%

The real risk-free rate of interest is 1.57% at the beginning of 2021. Inflation is expected to be 2% in 2021, jump to 4.00% in 2022, and run at 3% in 2023. A maturity risk premium is expected to be 0.37% per year to maturity. A liquidity premium on corporate bonds issued by small companies will continue to be 0.50%, regardless of their maturities. What should the interest rate on a 3-year Treasury security be at the beginning of 2021? Group of answer choices 5.85% 5.31% 5.54% 6.18% 5.68%

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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