Given the Rate Information in the Table Below,estimate the Nominal

question 136

Essay

Given the rate information in the table below,estimate the nominal rate for a AA-rated corporate bond.Assume a liquidity premium of 8 basis points.Identify as part of your answer the inflation risk premium,the default risk premium,the maturity premium,and the liquidity premium.
3-month T-bills 2.0%
30-year Treasury bonds 5.0%
AA-rated corp.bonds 8.0%
Inflation Rate 1.0%

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