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 3.25 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:
| Real risk-free rate | = 2.25% |
|---|---|
| Default risk premium | = 1.15% |
| Liquidity risk premium | = 0.50% |
| Maturity risk premium | = 1.75% |
a. What is the inflation premium? b. What is the fair interest rate on Moore Corporation 30-year bonds?
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Canadian Multinationals And International Finance
Authors: Gregory P. Marchildon, Duncan McDowall
1st Edition
0714634816, 978-0714634814
