Suppose the real risk-free rate of interest is 4%, the maturity risk premium is 2%, the inflation premium is 6%, the default risk on similar debt is 3%, and the liquidity premium is 2%. What is the nominal interest rate on this venture's debt capital?

Question

Quizplus · Accepted Answer

The nominal interest rate is calculated by summing all the given premiums and the real risk-free rate: 4% (real risk-free rate) + 2% (maturity risk premium) + 6% (inflation premium) + 3% (default risk premium) + 2% (liquidity premium) = 17%.

Suppose the Real Risk-Free Rate of Interest Is 4%, the Maturity