We can view an interest rate as composed of a risk-free interest rate plus a collection of compensatory premiums (These premiums are:

• The Inflation Premium
• The Default Risk Premium
• The Liquidity Premium
• The Maturity Premium

 

Which one of these premiums is likely increasing under our current 2022 economic circumstances?  If this premium increase causes interest rates to rise over the next year, what will happen to the present value of all assets that provide future cashflows?

Answer rating: 100% (QA)

The Inflation Premium is likely increasing under our current 2022 economic circumstances Inflatio... View the full answer