If the three-month Treasury bill has an interest rate of 0.2%, the ten-tear Treasury bond has an interest rate of 2.75%, and a ten-year bond issued by Time Warner has an interest rate of 6%, what is the risk premium on Time Warner's bond?
What will be an ideal response?
The risk premium is 6% - 2.75% = 3.25%.
You might also like to view...
The proposal that trade agreements should include a system which monitors worker conditions and make the results available to consumers in the rich importing country
A) is consistent with the Invisible Hand paradigm. B) is consistent with the market failure approach. C) is consistent with the Ricardian theory of comparative advantage. D) is consistent with the scale economies approach to trade theory. E) is consistent with the principles laid out by the WTO.
In a floating exchange rate system, an appreciation of the exchange rate could be caused by
a. a cut in taxes. b. a decrease in government spending. c. an increase in the domestic money supply. d. a decrease in the foreign demand for U.S. goods.
If the income multiplier is equal to 5, then a $1 initial increase the country's exports will lead to a
a. 5 percent decrease in national income b. 5 percent increase in national income c. $5 decrease in national income d. $5 increase in national income e. 0.05 percent increase in national income
Jonathan Gold Miners & Co operates in a perfectly competitive market. In recent years, it has benefitted from a record rise in gold prices as the price of its output is highly influenced by market speculation. It buys its inputs from perfectly competitive resource markets. If it wants to take advantage of the rise in gold prices, it should: a. increase its production and accept the market price
for its physical capital inputs. b. increase its price to a level where it is higher than its marginal revenue. c. reduce its production to encourage speculators to drive gold prices higher. d. negotiate to reduce the wage rate of its labor inputs to maximize profits.