Time Value of Money Flashcards
(4 cards)
1
Q
Nominal Risk Free Rate
A
The risk free rate not adjusted for inflation
Formula:
Real Risk Free Rate + Expected Inflation Rate
2
Q
Default Risk
A
The risk that a borrower will not make a promised payment in a timely manner
3
Q
Liquidity Risk
A
The risk that you will receive less than fair value for an investment if it must be sold for cash quickly
4
Q
Maturity risk
A
Longer maturity investments have more maturity risk then shorter term investments and require a maturity risk premium
