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What is fair interest rate on moore corporation year bonds

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Reference no: EM132763972

You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills page 55are currently earning 3.25 percent.

Your broker has determined the following information about economic activity and Moore Corporation bonds:

Real risk-free rate = 2.25%

Default risk premium = 1.15%

Liquidity risk premium = 0.50%

Maturity risk premium = 1.75%

Problem a. What is the inflation premium?

Problem b. What is the fair interest rate on Moore Corporation 30-year bonds?

Reference no: EM132763972

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