The following premiums apply to an 8-month bond: interest rate risk premium = .32%; liquidity premium = .44%; default premium = 1.15%; inflation premium = 2.44%; real rate = 3.20%. What is the expected nominal interest rate on an 8-month risky security given these values?
A) 5.85%
B) 6.45%
C) 7.55%
D) 8.31%
E) 9.30%
Correct Answer:
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