You Are Given the Following Data

question 56

Multiple Choice

You are given the following data:
R* = real risk-free rate
= 4%Constant inflation premium
= 7%Maturity risk premium
= 1%Default risk premium for AAA bonds
= 3%Liquidity premium for long-term T-bonds
= 2%Assume that a highly liquid market does not exist for long-term T-bonds,and the expected rate of inflation is a constant.Given these conditions,the nominal risk-free rate for T-bills is ____,and the rate on long-term Treasury bonds is ____.

• A) 4%;14%
• B) 4%;15%
• C) 11%;14%
• D) 11%;15%
• E) 11%;17%

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Definitions:

Corporate Dissolution

The process of legally terminating the existence of a corporation, involving the cessation of business operations, liquidation of assets, and distribution of the residual to creditors and shareholders.

Shareholder Petition

A formal request or action taken by one or more shareholders of a company, often to address grievances or propose changes in company policy or management.

Shareholder Approval

The process of obtaining consent from shareholders, typically through voting, for corporate actions such as mergers, acquisitions, or selling significant assets.

Asset Acquisition

The purchase of a company's assets instead of its stock, generally to obtain select pieces of the company without assuming its liabilities.