You are considering an investment in a one year government debt security with a yeild od 5% or a highly liquid corporate debt security with a yeild of 6.5%. The expected inflation rate for the next year is expected to be 2.5%.

Question

A. what would be your real rate earned on either of the tow investments?
B. what would be the default risk premium o the corporate debt security?

Answer 1

You are considering an investment in a one year government debt security with a yeild od 5% or a highly liquid corporate debt security with a yeild of 6.5%. The expected inflation rate for the next year is expected to be 2.5%.
A. what would be your real rate earned on either of the tow investments?
B. what would be the default risk premium o the corporate debt security?

Answer 2

You are considering an investment in a one year government debt security with a yeild od 5% or a highly liquid corporate debt security with a yeild of 6.5%. The expected inflation rate for the next year is expected to be 2.5%.
A. what would be your real rate earned on either of the tow investments?
B. what would be the default risk premium o the corporate debt security?

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