Characteristic Component Symbol it changes over time, depending on the expected rate of return on productive assets exchanged among market participants and people's time preferences for consumption. This is the premium added to the risk-free rate that reflects the average sustained increase in the general level of prices for goods and services expected over the security's entire life This premium is added when a security lacks marketability, because it cannot be bought and sold quickly without losing It is calculated by adding the inflation premium to r It is based on the bond's rating; the higher the rating, the lower the premium added, thus lowering the interest rate As interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. Because interest rate changes are uncertain, this premium is added as a compensation for this