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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 Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 1.75 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:

Real risk-free rate = 0.90%

Default risk premium = 1.65%

Liquidity risk premium = 0.85%

Maturity risk premium = 2.25%

Required -

What is the inflation premium?

What is the fair interest rate on Moore corporation 30 year bonds?

Reference no: EM132564552

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