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4 years ago

Determinants of market interest rates

Business

1 answer:

ollegr [7]4 years ago

7 0

Answer:

1. Real risk-free rate.

2. Nominal risk free-rate.

3. Inflation premium.

4. Liquidity risk premium.

5. Liquidity risk premium.

6. Maturity risk premium.

Explanation:

Market interest rates can be defined as the amount of interests (money) paid by an individual on deposits and other financial securities or investments. The factors that typically affect the market interest rate known as the determinant of market interest rates are;

1. This is the rate on short-term U.S. Treasury securities, assuming there is no inflation: Real risk-free rate r*

2. It is calculated by adding the inflation premium to r*: Nominal risk free rate.

3. This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time: Inflation premium.

4. This is the premium added as a compensation for the risk that an investor will not get paid in full: Liquidity risk premium.

5. This premium is added when a security lacks marketability, because it cannot be bought and sold quickly without losing value: Liquidity risk premium.

6. This is the premium that reflects the risk associated with changes in interest rates for a long-term security: Maturity risk premium.

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3 years ago

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Blaster, Inc., manufactures portable radios. Each radio requires 3 units of Part XBEZ52, which has a standard cost of $1.25 per

garik1379 [7]

Answer:

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3 years ago

On April 1, 2016, the premium on a one-year insurance policy was purchased for $3,000 cash with the insurance coverage beginning

Gekata [30.6K]

Answer:

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Explanation:

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Debit Credit

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3 years ago

Paney Company makes and sells calendars. The information on the cost per unit is as follows: Direct materials $1.50 Direct labor

Vsevolod [243]

Answer:

Break-even point (dollars)= $80,000

Explanation:

Giving the following information:

Variable costs:

Direct materials $1.50

Direct labor 1.20

Variable overhead 0.90

Variable marketing expense 0.40

Total variable costs= 4

Fixed costs:

The fixed marketing expense totaled $13,000

The fixed administrative expense totaled $35,000.

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To calculate the break-even point in dollars, we need to use the following formula:

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Break-even point (dollars)= $80,000

3 0

3 years ago