Determinants of Bond Yield

1 Term Structure of Interest Rates _____ The portion of a nominal interest rate or bond yield that represents for possibility of default

2 Inflation Premium _____ The compensation investors demand for bearing interest rate risk

3 Interest Rate Risk Premium _____ The portion of a nominal interest rate or bond yield that represents compensation for unfavorable tax status

4 Treasury Yield Curve _____ The portion of a nominal interest rate that represents compensation for expected future inflation

5 Default Risk Premium _____ A plot of the yields on treasury notes and bonds relative to maturity

6 Taxability Premium _____ The relationship between nominal interest rates on default-free, pure discount securities and time to maturity

7 Liquidity Premium _____ The portion of a nominal interest rate or bond yield that represents compensation for lack of liquidity

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