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Determinants of Interest Rates for Individual Securities.You are considering an investment in 30-year bonds issued by Moore Corporation.The bonds have no special covenants.The Wall Street

Determinants of Interest Rates for Individual Securities.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 1.25 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:

Real riskfree rate = 0.75%

Default risk premium = 1.15%

Liquidity risk premium = 0.50%

Maturity risk premium = 1.75%

  1. What is the inflation premium?
  2. What is the fair interest rate on Moore Corporation 30 year bonds?

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