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getsetgo, MBA
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Experience:  MBA from IIM Calcutta, Engineer, 8+ years of exp. at executive level
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9. (TCO C) 5-year Treasury bonds yield 5.5%. The inflation

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9. (TCO C) 5-year Treasury bonds yield 5.5%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on five-year bonds is 0.4%. What is the real risk-free rate, r*? (Points : 10)
2.59%
2.88%
3.20%
3.52%
3.87%

getsetgo :

Answer is: 3.20%

getsetgo :

r = r* + IP + MRP

5.5% = r* + 1.9% + 0.4

r* =5.5% - 2.3%=3.20%

r* = 5.5% - 2.3%

r* = 3.2%

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Customer: replied 5 years ago.
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