Calculate the risk premium for each of the following rating


Calculate the risk premium for each of the following rating classes of? long-term securities, assuming that the yield to maturity (YTM) for comparable Treasuries is 4.11%.

Rating Class      Nominal Interest Rate

AAA                             4.64%

BBB                               6.18

B                                  7.37

1 The risk premium for securities class AAA is __________% Round to two decimals

2 The risk premium for securities class BBB is ___________%Round to two decimals

3 The risk premium for securities class B is _____________% Round to two decimals

Carl? Foster, a trainee at an investment banking? firm, is trying to get an idea of what real rate of return investors are expecting in? today's marketplace. He has looked up the rate paid on? 3-month U.S. Treasury bills and found it to be 5.5%. He has decided to use the rate of change in the Consumer Price Index as a proxy for the inflationary expectations of investors. That annualized rate now stands at 3.0%.  On the basis of the information that Carl has? collected, what estimate can he make of the real rate of return?

The estimate of the rreal rate of return is___________% Round to one decimal place

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Financial Management: Calculate the risk premium for each of the following rating
Reference No:- TGS01703484

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