You are considering an investment in a U

Subject:FinancePrice:2.87 Bought7

Share With

You are considering an investment in a U.S. Treasury bond but you are not sure what rate of interest it should pay. Assume that the real risk-free rate of interest is 1.0%; inflation is expected to be 1.5%; the maturity risk premium is 2.5%; and the default risk premium for AAA -rated corporate bonds is 3.5%. What rate of interest should the U.S. Treasury bond pay?