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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 3.90 percent. Your broker has determined the following information about economic activity and the corporation bonds:

Real interest rate = 3.20%

Default risk premium = 3.15%

Liquidity risk premium = 1.40%

Maturity risk premium = 2.90%

What is the inflation premium? What is the fair interest rate on the corporation's 30-year bonds?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92722034

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