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This is the difference between the interest rate on a US Treasury bond and a...

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This is the difference between the interest rate on a US Treasury bond and a corporate bond of the same profilethat is, the same maturity and marketability. It is based on the bond's marketability and trading frequency; the less frequently the security is traded, the higher the premium added, thus increasing the interest rate. This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time. | | This is the rate on a Treasury bill or a Treasury bond. This is the rate on short-term US Treasury securities, assuming there is no inflation. This is the premium that reflects the risk associated with changes in interest rates for a long-term security. Component Inflation premium Default risk premium Liquidity risk premium Real risk-free rate Maturity risk premium Nominal risk-free rate Symbol DRP MRP r* TRF IP LP

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