You read The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:
-Inflation premium=3.25%
-Liquidity Premium=0.6%
-Maturity Risk premium=1.8%
- Default risk premium=2.15%
On the basis of these data, what is the real risk-free rate of return? Show your work.