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Flashcards in Time Value of Money Deck (4)
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1

Nominal Risk Free Rate

The risk free rate not adjusted for inflation

Formula:
Real Risk Free Rate + Expected Inflation Rate

2

Default Risk

The risk that a borrower will not make a promised payment in a timely manner

3

Liquidity Risk

The risk that you will receive less than fair value for an investment if it must be sold for cash quickly

4

Maturity risk

Longer maturity investments have more maturity risk then shorter term investments and require a maturity risk premium