What is the inflation premium

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

Real risk-free rate

= 0.33%

Default risk premium

= 1.55%

Liquidity risk premium

= 0.90%

Maturity risk premium

= 1.05%

a. What is the inflation premium?

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

Reference no: EM133109957

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