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 1.90 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:Real risk-free rate = 0.85%
Default risk premium = 1.80%
Liquidity risk premium = 1.05%
Maturity risk premium = 2.40%
What is the inflation premium? What is the fair interest rate on Moore Corporation 30-year bonds?
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