As Aa 3. Determinants of market interest rates Some characteristics of the deter

Question

As Aa 3. Determinants of market interest rates Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: nent it changes over time, depending on the expected rate of return[ on productive assets exchanged among market participants and people's time preferences for consumption. This ls the difference between the interest rate on a U.s. Treasury bond and a corporate bond of the same profile-that is, the same maturity and marketability It is based on the bond's marketability and trading frequency; the less frequently the security Is traded, the higher the premium added, thus Increasing the interest rate. This is the premium that refects the risk associated with changes in interest rates for a long-term security. This is the premium added to the real risk-free rate to L compensate for a decrease in purchasing power over time. It is caliculated by adding the Inflation premim tor Continue without saving so 2 3 4. 5 6

Explanation / Answer

1 Real risk free rate (rRF) 2 Default risk premium (DRP) 3 Liquidity Risk (LP) 4 Maturity Risk Premium (MRP) 5 Inflation Premium (IP) 6 Nominal risk free rate (r*)

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