Exercises/Problems [Inflation and Risk Premiums] Voice River, Inc., provides media-on-demand services via the Internet Management has been studying current interest rates. A lender is willing to make a two-vear le Voice River at a 12 percent annual interest rate. The U.S. government is currently payıng 8 percent annual interest on its two-year securities. A. If the real rate of interest is expected to be 3 percent annually, what is the inflation premius expected at this time? B. What is the amount of the total risk premium that Voice River will have to pay? C. If a 1 percent liquidity premium is built into the 12 percent rate, what is the default risk premium

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Exercises/Problems
[Inflation and Risk Premiums] Voice River, Inc., provides media-on-demand services via the Internet
Management has been studying current interest rates. A lender is willing to make a two-vear le
Voice River at a 12 percent annual interest rate. The U.S. government is currently payıng 8 percent
annual interest on its two-year securities.
A. If the real rate of interest is expected to be 3 percent annually, what is the inflation premius
expected at this time?
B. What is the amount of the total risk premium that Voice River will have to pay?
C. If a 1 percent liquidity premium is built into the 12 percent rate, what is the default risk premium
Transcribed Image Text:Exercises/Problems [Inflation and Risk Premiums] Voice River, Inc., provides media-on-demand services via the Internet Management has been studying current interest rates. A lender is willing to make a two-vear le Voice River at a 12 percent annual interest rate. The U.S. government is currently payıng 8 percent annual interest on its two-year securities. A. If the real rate of interest is expected to be 3 percent annually, what is the inflation premius expected at this time? B. What is the amount of the total risk premium that Voice River will have to pay? C. If a 1 percent liquidity premium is built into the 12 percent rate, what is the default risk premium
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