Exam 1 review · Lesson 9 of 45

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The Cost of Money & the Rate Build-Up

Exam 1 review · 13 min read + video

What sets interest rates, and how to build any quoted rate from r*, an inflation premium, and maturity, default and liquidity premiums.

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Inside this lesson · 13 min

  1. Why this matters
  2. The core idea
  3. The formula
  4. Worked example 1: a 3-year Treasury note
  5. Worked example 2: a 6-year corporate bond
  6. Your turn
  7. Calculator steps
  8. Common mistakes
  9. Quick check
  10. Key takeaways