Question: Characteristic Component Symbol It is based on the bonds marketability and trading frequency; the less frequently the security is traded, the higher the premium added,

Characteristic Component Symbol It is based on the bonds marketability and trading frequency; the less frequently the security is traded, the higher the premium added, thus increasing the interest rate. Liquidity risk premium rRF This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time. Default risk premium DRP This is the difference between the interest rate on a US Treasury bond and a corporate bond of the same profilethat is, the same maturity and marketability. It is calculated by adding the inflation premium to r*

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