Which of the Following Comprise the Nominal Interest Rate on Default-Free

question 9

Multiple Choice

Which of the following comprise the nominal interest rate on default-free securities according to the modern view of the term structure of interest rates?
I. liquidity premium
II. real rate
III. interest rate risk premium
IV. inflation premium

• A)I and II only
• B)II and III only
• C)III and IV only
• D)II, III, and IV only
• E)I, II, III, and IV

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Definitions:

Trichromatic Theory

A theory of color vision that suggests our ability to perceive color is based on the response rates of three types of cones in the eye, each sensitive to different light wavelengths.

Color Vision

The capability of the visual system to distinguish objects based on the wavelengths of the light they reflect, emit, or transmit.

Cones

Photoreceptor cells in the retina of the eye responsible for color vision and functioning best under bright light conditions.

Response

A reaction or reply to a stimulus or a particular situation, ranging from physical responses in the body to complex emotional and cognitive reactions.