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Answer with component and symbol please
àhttp: /courses aplia.com af sen et quiz?qur_actionstake uz&qui; C Aplia: Student Question x eChegg Study Guided Solutio. 6. Determinants of market interest rates Aa Aa Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Characteristic Component Symbol 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. It is calculated by adding the inflation premium to As interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. Because interest rate changes are uncertain, this premium is added as a compensation for this uncertainty This is the premium added to the risk-free rate that reflects the average sustained increase in the general level of prices for goods and services expected over the security's entire life This is 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 Flash Player WIN 20,0,0,228 Q3 3.34 2004-2016 Aplia. All rights reserved © 2013 Cengage Learning except as noted. All rights reserved Grade It Now Save & Continue Session eout 59:16 12:14 PM 4/8/2016Explanation / Answer
1. Real risk free rate, r*.
As per the definition, its real risk free rate.
2. Nominal or quoted risk free rate, rRF.
As per the definition.
3. Maturity risk premium, MRP.
As per the definition.
4. Inflation premium, IP.
As per the definition.
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