Suppose the real risk-free rate is 4.20%, the average expected future inflation rate is 2.50%, and a maturity risk premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the number of years to maturity, hence the pure expectations theory is NOT valid. What rate of return would you expect on a 4-year Treasury security? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.
A. 7.67%
B. 7.10%
C. 7.53%
D. 6.96%
E. 5.40%
Answer: B
You might also like to view...
Which of the following is a disadvantage of a cost leadership strategy?
A. Producers are more able to withstand increases in suppliers' cost. B. Cost differences increase as the market matures. C. It attempts to stay ahead of the competition may lead to gold plating. D. The strategy is too easily imitated.
If the equilibrium price of gasoline is $2.75 per gallon and the government will not allow oil companies to charge more than $2.00 per gallon of gasoline, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.00. B) Supply must eventually increase so that the market will come into equilibrium at a price of $2.00. C) Total surplus in the market will be lower than it would be if the price was $2.75 per gallon. D) The market will be in equilibrium at a price of $2.00.
Why should an organization change objective be systemic?
What will be an ideal response?
The most common form of production deviance is
A. incivility. B. wasting resources. C. harassment. D. substance abuse. E. theft.