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Assignment ID: FG133136893
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 T-bills are currently earning 1.25 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:
Real risk -free rate = 0.75%
Default risk premium = 1.15%
Liquidity risk premium = 0.50%
Maturity risk premium = 1.75%
Required – What is the inflation premium?