Determinants of market interest rates Some characteristics of the determinants of nominal interest rates are listed

Determinants of market interest rates Some characteristics of the determinants of nominal interest rates are listed

 

 

answer:

Charactaristic Companents Symbol
It changes over time, depending on the expected
rate of return Real risk—free rate J on productive assets exchanged among market participants and people’s time preferences for consumption.
real risk-free rate r*
This is the rate for a riskiess security that is exposed to   changes in inflation. Nominal risk—free rate r RF
This is a premium added to the real risk free rate to compensate for a decreased in purchasing power over time Inflation Premium IP
This is the premium added to the equilibrium interest rate on a Liquidity risk premium V security that cannot be bought or sold quickly enough to prevent or minimize loss. Liquidity risk premium LP
This is the premium that reflects the risk associated with changes in interest rates for a long term securit Maturity risk premium MRP
This is a premium added to the real risk free rate to compensate for the risk that investor will not get paid in full Default Risk Premium DRP

 

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