Answer Happy

Ch.06: Quiz Ⓒ 7 k 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 5.30 percent. Your broker has determined the following information about economic activity and the corporation bonds Real interest rate - 4.30% Default risk premium-2.85% Liquidity risk premium-55% Maturity risk premium-2.60% What is the inflation premium? What is the fair interest rate on the corporation's 30-year bonds? Multiple Choice 530% and 15.40%, respectively 80% and 2 22%, respectively 30% and 10.30%, respectively 80% and 11.10%, respectively