Problem $6-2$ Determinants of Interest Rates for Individual Securities $($LG$6-6)$

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 $1\mathrm{.}90$ percent. Your broker has determined the following information about

economic activity and Moore Corporation bonds:

Real risk$-$free rate $=0\mathrm{.}85\%$

Default risk premlum $=1\mathrm{.}80\%$

Liquidity risk premlum $=1\mathrm{.}05\%$

Maturity risk premlum $=240\%$

a$.$ What is the inflation premium?

b$.$ What is the falr interest rate on Moore Corporation $30-$year bonds?

Note: Round your percentage answers to $2$ decimal places $(1.$e$.,0\mathrm{.}1234$ should be entered as $12\mathrm{.}34).$