The Inflation Risk Premium on a Bond Is 2 Percent

Multiple Choice

The inflation risk premium on a bond is 2 percent, the U.S. T-bill rate is 5 percent, the maturity risk premium on the bond is 3 percent, the default risk premium on the bond is 2 percent, and the liquidity risk premium on the bond is 1 percent. Calculate its nominal rate of return.

A) 16%
B) 13%
C) 11%
D) 9%