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What is the largest portion of the interest rate? Your answer: Opportuity cost b Default risk...

What is the largest portion of the interest rate? Your answer: Opportuity cost b Default risk premium c Maturity risk premium d Inflation compensation

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Answer #1

It shall be noted that the interest rate is the percentage of an amount of money charged for its use per some period of time. It can also be thought of as the cost of not having money for one period, or the amount paid on an investment per year. The cost of money is the opportunity cost of holding money in hands instead of investing it.

The risk premium are top-up due to additional risk involved.

Inflation compensation is a small portion of the interest rate.

Hence, the largest portion of the interest rate is a. opportunity cost

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