You are considering an investment in 20-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that one-year T-bills are currently earning 0.50 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.47% Default risk premium = 1.05% Liquidity risk premium = 0.60% Maturity risk premium = 0.85%
a. What is the inflation premium? (Round your answer to 2 decimal places. (e.g., 32.16))
Inflation premium %
b. What is the fair interest rate on Moore Corporation 30-year bonds? (Round your answer to 2 decimal places. (e.g., 32.16))
Fair interest rate %