7. Determinants of market interest rates
Some characteristics of the determinants of nominal interest
rates are listed as follows. Identify the components (determinants)
and the symbols associated with each characteristic:
Component: Real Risk-Free Rate, Maturity Risk Premium, Inflation
Premium, Nominal Risk-Free Rate, Default Risk Premium, Liquidity
Risk Premium
Symbol: rRF, LP, DRP, IP, MRP, r*
Characteristic
Component
Symbol
This is the difference between the interest rate on a US
Treasury bond and a corporate bond of the same profile—that is,...