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You are considering an investment in 30-year bonds issued by a corporation. The bonds have...

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Finance

You are considering an investment in 30-year bonds issued by a corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 3.60 percent. Your broker has determined the following information about economic activity and the corporation bonds: Real interest rate = 2.80% Default risk premium = 2.35% Liquidity risk premium = 1.00% Maturity risk premium = 2.10% What is the inflation premium? What is the fair interest rate on the corporation's 30-year bonds?

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