risk premiums fin303

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4 Terms

1
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Which risk premiums are added to r* to determine the yield on a short-term Treasury bill?

Inflation Premium only; MRP = 0, DRP = 0, and LP = 0.

2
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Which risk premiums are added to r* to determine the yield on a long-term Treasury bond?

Inflation Premium and Maturity Risk Premium; DRP = 0 and LP = 0.

3
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Which risk premiums are added to r* to determine the yield on a short-term corporate bond?

Inflation Premium, Default Risk Premium, and Liquidity Premium; MRP = 0.

4
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Which risk premiums are added to r* to determine the yield on a long-term corporate bond?

All four: IP, MRP, DRP, and LP.