Exam 6: Interest Rates and Bond Valuation

The nominal rate of interest is equal to the sum of the real rate of interest plus an inflation premium plus a risk premium.

The significant portion of the return on a zero coupon bond is in the form of

The return expected from an asset is fully defined by its

During the past twenty years, the rate of return on U.S. treasury bills always exceeded the rate of inflation as measured by the consumer price index.