FIN 3100 CH 5
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We assign a very low probability of default to the U.S. Treasury and thus assume that all Treasury bills will be paid in full at maturity and thus have a zero default premium. (T/F)
True
The ________ compensates the investor for the additional risk that the loan will not be repaid in full.
default premium
Nominal interest rates are the sum of two major components. These components are ________.
real interest rate and expected inflation