Question
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
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 2.20 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:
Real risk-free rate = 0.80%
Default risk premium = 2.10%
Liquidity risk premium = 1.40%
Maturity risk premium = 2.70%
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What is the inflation premium? (Round your answer to 2 decimal places.)
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What is the fair interest rate on Moore Corporation 30-year bonds? (Round your answer to 2 decimal places.)
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Corporate Finance Theory And Practice
Authors: Aswath Damodaran
2nd Edition
0471283320, 9780471283324
