Determinants of Interest Rate for Individual Securities You are considering an investment in 30-year bonds issued...

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Determinants of Interest Rate for Individual Securities You areconsidering an investment in 30-year bonds issued by a corporation.The bonds have no special covenants. The Wall Street Journalreports that 1-year T-bills are currently earning 3.60 percent.Your broker has determined the following information about economicactivity and the corporation bonds:
Real interest rate = 3.05%
Default risk premium = 2.85%
Liquidity risk premium = 1.25%
Maturity risk premium = 2.60%

What is the inflation premium? What is the fair interest rate onthe corporation's 30-year bonds?

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Determinants of Interest Rate for Individual Securities You areconsidering an investment in 30-year bonds issued by a corporation.The bonds have no special covenants. The Wall Street Journalreports that 1-year T-bills are currently earning 3.60 percent.Your broker has determined the following information about economicactivity and the corporation bonds:Real interest rate = 3.05%Default risk premium = 2.85%Liquidity risk premium = 1.25%Maturity risk premium = 2.60%What is the inflation premium? What is the fair interest rate onthe corporation's 30-year bonds?