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What is the inflation premium

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Question: You are considering an investment in 30-year bonds issued by a corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 3.80 percent. Your broker has determined the following information about economic activity and the corporation bonds: Real interest rate = 2.65% Default risk premium = 2.05% Liquidity risk premium = .85% Maturity risk premium = 1.80% What is the inflation premium? What is the fair interest rate on the corporation's 30-year bonds?

Reference no: EM131735011

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