Time preference for consumption refers to consumers’ preferences for current
consumption versus savings for future consumption: consumers with low preferences
for current consumption will be willing to lend at a lower rate than consumers with a
high preference for current consumption.
Inflation refers to the tendency of prices to rise, and the higher the expected rate
of inflation, the larger the required rate of return.
Risk, in a money and capital market context, refers to the chance that the future
cash flows will not be as high as expected--the higher the perceived default risk, the
higher the required rate of return.
Risk is also linked to the maturity and liquidity of a security. The longer the
maturity and the less liquid (marketable) the security, the higher the required rate of
return, other things constant.