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QUESTION
The following premiums apply to a 8-month bond: interest rate risk premium = 0.31 percent; liquidity premium = 0.44 percent; default premium = 1.23...
The following premiums apply to a 8-month bond: interest rate risk premium = 0.31 percent; liquidity premium = 0.44 percent; default premium = 1.23 percent; inflation premium = 3.12 percent; real rate = 3.20 percent. What is the expected nominal interest rate on a 8-month risky security given these values?
