You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have...
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Accounting
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 3.25 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:
| Real risk-free rate | = | 2.25 | % |
| Default risk premium | = | 1.15 | % |
| Liquidity risk premium | = | 0.50 | % |
| Maturity risk premium | = | 1.75 | % |
a. What is the inflation premium? b. What is the fair interest rate on Moore Corporation 30-year bonds? (For all requirements, round your answers to 2 decimal places. (e.g., 32.16))
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