Solved: Find the real risk-free rate of return, Finance Basics

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Find the real risk-free rate of return

Question:

You read in the Wall Street Journal that 30-day US Treasury Bills are currently yielding 8%. Your brother in law, a broker at Kyoto Securities, has given you the following estimates of current interest rate premiums:

Inflation Premium = 5.0%
Liquidity Premium = 1.0%
Maturity Risk Premium = 2.0%
Default Risk Premium = 2.0%

Based on this data, the real risk-free rate of return is:

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Finance Basics: Find the real risk-free rate of return

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