Q1. Which one of the following statements best describes the components of the required interest rate on a security?
A) The nominal risk-free rate, the expected inflation rate, the default risk premium, a liquidity premium and a premium to reflect the risk associated with the maturity of the security.
B) The real risk-free rate, the default risk premium, a liquidity premium and a premium to reflect the risk associated with the maturity of the security.
C) The real risk-free rate, the expected inflation rate, the default risk premium, a liquidity premium and a premium to reflect the risk associated with the maturity of the security.
Correct answer is C)
The required interest rate on a security is made up of the nominal rate which is in turn made up of the real risk-free rate plus the expected inflation rate. It should also contain a liquidity premium as well as a premium related to the maturity of the security.
Q2. T-bill yields can be thought of as:
A) nominal risk-free rates because they do not contain an inflation premium.
B) real risk-free rates because they contain an inflation premium.
C) nominal risk-free rates because they contain an inflation premium.
Correct answer is C)
T-bills are government issued securities and are therefore considered to be default risk free. More precisely, they are nominal risk-free rates rather than real risk-free rates since they contain a premium for expected inflation.
Q3. The real risk-free rate can be thought of as:
A) exactly the nominal risk-free rate reduced by the expected inflation rate.
B) approximately the nominal risk-free rate reduced by the expected inflation rate.
C) approximately the nominal risk-free rate plus the expected inflation rate.
Correct answer is B)
The approximate relationship between nominal rates, real rates and expected inflation rates can be written as:
Nominal risk-free rate = real risk-free rate + expected inflation rate.
Therefore we can rewrite this equation in terms of the real risk-free rate as:
Real risk-free rate = Nominal risk-free rate – expected inflation rate
The exact relation is: (1 + real)(1 + expected inflation) = (1 + nominal)
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发表于 2010-5-14 12:53
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