If the Six-Month Treasury Bill Has an Interest Rate of 0.5%,the

question 81

Short Answer

If the six-month Treasury bill has an interest rate of 0.5%,the ten-year Treasury bond has an interest rate of 1.6%,and a ten-year bond issued by Dell has an interest rate of 4%,what is the risk premium on Dell's bond?

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Definitions:

Depreciable Cost

The cost of an asset that is subject to depreciation over its useful life, excluding any salvage value.

Double-Declining-Balance Rate

A method of accelerated depreciation where an asset's book value is reduced at double the rate of its straight-line depreciation each year.

Double-Declining-Balance Depreciation

A method of accelerated depreciation that applies twice the normal depreciation rate on the declining balance of an asset.

Straight-Line Depreciation

A technique for spreading the expense of a physical asset evenly across its lifespan.