00:01
Hello students, here is a question.
00:03
Real risk -free rate is 1 .6%, expected inflation rate is 7 .2 % for this year and 5 .4 % for next year, 3 .8 % in the year after next, 2 .0 % then on.
00:16
Maturity risk premium is 0 .132 into t minus 1%, t is the number of years of maturity.
00:24
Liquid risk premium is 0 .35%, default risk premium is 0 .70%.
00:31
So this is our question, let us start doing the solution for this.
00:35
Real risk -free rate is 1 .6%, that will be 0 .016.
00:54
Then expected inflation rate for the year will be inflation rate for the year, it is 7 .2%, that will be 0 .72.
01:17
Inflation rate for next year will be inflation rate of next year, it is 5 .4%, that we can write it as 0 .054.
01:32
Inflation for third year will be 3 .8%, that we can write it as 0 .038...
