AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Interest Rate Determinants26.If a portfolio had a return of 11%, the risk-free asset return was 6%, and the standard deviation of the portfolio's excess returns was 25%, the risk premium would be A. 14%.

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B. 6%.C. 35%.D. 21%.E.5%.11 - 6 = 5%.

AACSB: AnalyticBlooms: ApplyDifficulty: IntermediateTopic: Risk27.In words, the real rate of interest is approximately equal to

AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Rates of Return28.If the Federal Reserve lowers the discount rate, ceteris paribus, the equilibrium levels of funds lent will __________ and the equilibrium level of real interest rates will ___________. 5-15

AACSB: AnalyticBlooms: ApplyDifficulty: IntermediateTopic: Interest Rate Determinants29.What has been the relationship between T-Bill rates and inflation rates since the 1980s?

AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Return Analysis30."Bracket Creep" happens when

A. tax liabilities are based on reand there is a negative inflatB. tax liabilities are based on real income and there is a positive infC. tax liabilities are based on nominal income and there is a negativD.tax liabilities are based on nominal income and there is a positivE. too many peculiar people make their way into the highest tax braA positive inflation rate typically leads to higher nominal income. Higher nominal income means people will have higher tax liabilities and in some cases will put them in higher tax brackets. This can happen even when real income has declined.

AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Taxes and Interest