CFA Level 1 Exam
Question No. 1
Assuming that the nominal risk-free rate of interest is currently at 4.90% per year, with the real inflationfree rate of return at 2.05% per year, what is the inflation premium? Further, assuming that the inflation premium is to fall by 130 basis points, what would be the adjusted nominal risk-free rate of interest?
Assume that both the new inflation rate and the inflation-free rate of interest are considered small by historical standards.
Choose the correct option from the given list.
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