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Determinants of Interest Rate for Individual Securities 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 3.80 percent. Your broker has determined the following information about economic activity and the corporation bonds: Real interest rate = 2.65% Default risk premium = 2.05% Liquidity risk premium = .85% Maturity risk premium = 1.80% What is the inflation premium? What is the fair interest rate on the corporation's 30-year bonds? 3.80% and 11.15%, respectively 1.15% and 1.70%, respectively 1.15% and 7.35%, respectively 1.15% and 8.50%, respectively.

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Financial Management, Finance

Category:- Financial Management
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