(Solved): Some characteristics of the determinants of nominal interest rates are listed as follows. Identify ...

Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Characteristic Component Symbol This is the rate on short-term US Treasury securities, assuming there is no inflation. As interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. Because interest rate changes are uncertain, this premium is added as a compensation for this uncertainty. It is based on the bond's marketability and trading frequency; the less frequently the security is traded, the higher the premium added, thus increasing the interest rate. This is the rate on a Treasury bill or a Treasury bond. This is the premium added as a compensation for the risk that an investor will not get paid in full. This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time.