The difference between the required return from corporate debt and from government securities is called _______________.

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Question 35

2.5pts

A government treasury bond with 5-year tenor carries a 6.5% coupon. Normally, government treasury bonds carry a 1.5% maturity risk premium. Assuming an inflation rate of 2.5% is expected over the tenor of the t-bond, how much is the real risk-free rate.

Answer should be with 2 decimal points without the percentage sign (e.g., 3.00).

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Question 36

2.5pts

A government treasury bond with 5-year tenor carries a 4.5% coupon. Normally, government treasury bonds carry a 1.5% maturity risk premium. Assuming an inflation premium of 0.65%, how much is the real risk-free rate.

Answer should be with 2 decimal points without the percentage sign (e.g., 3.00).

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Question 37

2.5pts

What is the name of the rule which is represented by the following formula:

Nominal Interest Rate = Real Interest Rate + Inflation Premium

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Question 38

2.5pts

The following information are provided to you:

• Current government securities carry a real interest rate at 3.75%
• Inflation premium for long-term securities is estimated at 1.25%
• The market risk premium for equity instruments today is estimated at 2.50%
• Alphabet Inc.'s beta is estimated to be at 1.25
• Apple Co.'s beta is estimated to be at 1.10

How much is the required rate of return for Alphabet Inc.?

Answer should be with 2 decimal points without the percentage sign (e.g., 3.00). Don't forget to indicate whether your answer is positive or negative.