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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 1year Tbills are currently earning

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

    

  Real risk-free rate = 0.75%
  Default risk premium = 1.70%
  Liquidity risk premium = 1.05%
  Maturity risk premium = 2.30%

   

a.

What is the inflation premium? (Round your answer to 2 decimal places.)

b.

What is the fair interest rate on Moore Corporation 30-year bonds? (Round your answer to 2 decimal places.)

Apr 11 2020 View more View Less

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