Question: given the rate information in the table below estimate the...
Given the rate information in the table below, estimate the nominal rate for a AA-rated
corporate bond. Assume a liquidity premium of 6 basis points. Identify as part of your
answer the inflation risk premium, the default risk premium, the maturity premium, and the liquidity premium.
3-month T-bills 4.0%
30-year Treasury Bonds 6.0%
AA-rated Corp. Bonds 8.0%
Inflation Rate 2.5%