Question: Question (2): Answer the following question: (4 marks) > You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no

Question (2): Answer the following question: (4 marks) > 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%. 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? (2 marks) b) What is the fair interest rate on Moore Corporation 30- years bonds? (2 marks)

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