The following premiums apply to a 7-month bond: interest rate risk premium = 0.35 percent; liquidity premium = 0.40 percent; default premium = 1.20 percent; inflation premium = 3.15 percent; real rate = 3.00 percent. What is the expected nominal interest rate on a 7-month risky security given these values?
A) 5.85 percent
B) 6.45 percent
C) 7.55 percent
D) 8.10 percent
E) 9.30 percent

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The Answer of The following premiums apply to a 7-month bond: interest rate risk premium = 0.35 percent; liquidity premium = 0.40 percent; default premium = 1.20 percent; inflation premium = 3.15 percent; real rate = 3.00 percent. What is the expected nominal interest rate on a 7-month risky security given these values?
A) 5.85 percent
B) 6.45 percent
C) 7.55 percent
D) 8.10 percent
E) 9.30 percent

The Following Premiums Apply to a 7-Month Bond: Interest Rate