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 1.75 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:

Real risk-free rate = 0.90%

Default risk premium = 1.65%

Liquidity risk premium = 0.85%

Maturity risk premium = 2.25%

a.	What is the inflation premium? (Round your answer to 2 decimal places.)

Expected IP

%

b.	What is the fair interest rate on Moore Corporation 30-year bonds? (Round your answer to 2 decimal places.)

Fair interest rate

%

One-year Treasury bills currently earn 4.05 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 4.25 percent. The liquidity premium on 2-year securities is 0.07 percent. If the liquidity theory is correct, what should the current rate be on 2-year Treasury securities? (Round your answer to 2 decimal places.)

On March 11, 20XX, the existing or current (spot) 1-, 2-, 3-, and 4-year zero coupon Treasury security rates were as follows:

₁R₁ = 0.65%, ₁R₂ = 1.30%, ₁R₃ = 1.70%, ₁R₄ = 1.85%

Using the unbiased expectations theory, calculate the 1-year forward rates on zero coupon Treasury bonds for years 2, 3, and 4 as of March 11, 20XX. (Do not round intermediate calculations and round your answers to 2 decimal places.)

Years	Forward rates
2	%
3	%
4	%