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  3. you read in the wall street journal that 30-day t-

You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.8%. Your...

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Accounting

You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.8%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:
Inflation Premium (IP)=3.25%
Liquidity Premium (LP)=0.6%
Maturity Risk Premium (MRP)=1.85%
Default Risk Premium (DRP)=2.15%
On the basis of these data, what is the real risk-free rate of return?
2. Madsen Motors's bonds have 23 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 9%, and the yield to maturity is 11%. What is the bond's current market price?
3. A bond has $1,000 par value, 12 years to maturity, and 8% annual coupon and sells for $980.
a. What is its yield to maturity (YTM)?
b. Assume the yield to maturity remains constant for the next three years. Wat will the price be 3 years from today?
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