(Real interestrates: approximation method) If the realrisk-free rate of interest is 3.8% and the rate of inflation is expected to be constant at a level of 3.5 % what would you expect1-year Treasury bills to return if you ignore the cross product between the real rate of interest and the inflationrate?

The expected rate of return on1-year Treasury bills is? (Round to one decimalplace.)

(Inflation and interest rates) What would you expect the nominal rate of interest to be if the real rate is 4.4 percent and the expected inflation rate is 6.9 percent?

The nominal rate of interest is ?%. (Round to two decimalplaces.)

(Interest rate determination) You're looking at some corporate bonds issued byFord, and you are trying to determine what the nominal interest rate should be on them. You have determined that the realrisk-free interest rate is 3.6 %

3.6%, and this rate is expected to continue on into the future without any change. Inaddition, inflation is expected to be constant over the future at a rate of 3.3 %

3.3%. Thedefault-risk premium is also expected to remain constant at a rate of 2.4 %

2.4%, and theliquidity-risk premium is very small for Fordbonds, only about 0.02 %

0.02%. Thematurity-risk premium is dependent upon how many years the bond has to maturity. Thematurity-risk premiums are shown in the popupwindow: LOADING...

. Given thisinformation, what should the nominal rate of interest on Ford bonds maturing in0-1 year,1-2 years,2-3 years, and3-4 yearsbe?

The nominal rate of interest on Ford bonds maturing in0-1 year should be

nothing

%. (Round to two decimalplaces.)

The nominal rate of interest on Ford bonds maturing in1-2 years should be

nothing

%. (Round to two decimalplaces.)

The nominal rate of interest on Ford bonds maturing in2-3 years should be

nothing

%. (Round to two decimalplaces.)

The nominal rate of interest on Ford bonds maturing in3-4 years should be

nothing

%. (Round to two decimalplaces.)

date table

BOND MATURES IN: MATURITY-RISK PREMIUM:

0-1 year 0.08%

1-2 years 0.35%

2-3 years 0.70%

3-4 years 0.15%

(Interest rate determination) If the10-year Treasury bond rate is 5.2 %

5.2%, the inflation premium is 2.7 %

2.7%, and thematurity-risk premium on10-year Treasury bonds is 0.4 %

0.4%, assuming that there is noliquidity-risk premium on thesebonds, what is the realrisk-free interestrate?

The realrisk-free interest rate is

nothing

%. (Round to one decimalplace.)