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Determinants of Interest Rate for Individual Securities You are considering an investment in 30-year bonds issued by a corporation. The bonds have no special covenants.

Determinants of Interest Rate for Individual SecuritiesYou are considering 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 3.50 percent. Your broker has determined the following information about economic activity and the corporation bonds:

Real interest rate = 2.50%

Default risk premium = 1.75%

Liquidity risk premium = .70%

Maturity risk premium = 1.50%

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

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