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What is the inflation premium for captain america inc

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Reference no: EM133012411

You are considering an investment in 30-year bonds issued by Captain America Inc. The bonds have no special covenants. Bloomberg reports that 1-year T-bills are currently earning 2.75 percent.

Your Investment Advisor has determined the following information about economic activity and the Captain American Inc. bonds:

Real risk free rate = 1.25 percent

Default risk premium = 1.35 percent

Liquidity risk premium = 0.75 percent

Maturity risk premium = 1.25 percent

Problem 1: What is the inflation premium?

Group of answer choices

Option 1: .75%

Option 2: 1.25%

Option 3: 1.50%

Option 4: 1.45%

Option 5: 1.65%

Reference no: EM133012411

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