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Determining the real risk-free rate

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Real Risk-Free Rate

You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.4%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:

Inflation premium = 3%

Liquidity premium = 1%

Maturity risk premium = 2%

Default risk premium = 2.45%

On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places.

Reference no: EM131402110

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