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Real risk-free rate
You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:
Inflation premium = 3.25%
Liquidity premium = 0.6%
Maturity risk premium = 1.8%
Default risk premium = 2.15%
On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places.
%
Compute the Black-Scholes price for a call option with a strike price of $120, ?rst for a maturity of one year, and then for a variety of very long times to maturity.
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1 which of the statements below is false?a if you invest money for a short period and buy a six-month cd you will not
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