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Liono4ka [1.6K]
2 years ago
6

5-year Treasury bonds yield 6.1%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year T-bonds is 0

.4%. There is no liquidity premium on these bonds. What is the real risk-free rate, r*
Business
1 answer:
Dahasolnce [82]2 years ago
5 0

3.20 is the real risk-free rate

<h3>What is risk-free rate?</h3>

The risk-free rate of return, commonly abbreviated as the risk-free rate, is the rate of return on a hypothetical investment with scheduled payments over a set period of time that is assumed to meet all payment obligations.

Subtract the inflation rate from the yield on the Treasury bond that corresponds to the duration of your investment to calculate the real risk-free rate.

The risk-free rate determines the return an investor can expect from an investment over a specified time period. A risk-free rate is calculated by deducting the current inflation rate from the total yield of the treasury bond that corresponds to the investment duration.

To know more about risk-free rate follow the link:

brainly.com/question/19568670

#SPJ4

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Answer:

Both projects should be rejected

Explanation:

The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

IRR can be calculated using a financial calculator:

For project A,

Cash flow in year zero = $75,000

Cash flow in year one = $18,500

Cash flow in year two = $42,900

Cash flow in year three = $28,600

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For project B,

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The decision rule on if to invest or not is if IRR > r

For both investments IRR is less than rate of return

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9.48% < 10.50%

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button, and the compute button.

I hope my answer helps you

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It is not possible for abandonment options to decrease a project's risk as measured by the project's coefficient of variation.
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PRICES: Prices also effect the consumer decisions. because if prices of a commodity is high than consumer is not willing to buy that commodity . in simple if prices rises quantity demanded by consumer decreses and if prices decresing quantity demanded by consumer increses

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