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. The Wall Street Journal reports 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 = 3.25% Default risk premium = 3.25% Liquidity risk premium = 1.45% Maturity risk premium = 3.00% What is the inflation premium? What is the fair interest rate on the corporation's 30-year bonds?

.25% and 2.24%, respectively

.25% and 11.20%, respectively

3.50% and 14.45%, respectively

.25% and 10.95%, respectively