You are considering an investment in 20-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 0.30 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:
Real risk-free rate = 0.21%
Default risk premium = 1.15%
Liquidity risk premium = 0.80%
Maturity risk premium = 0.75%
a. What is the inflation premium?
b. What is the fair interest rate on Moore Corporation 30-year bonds?
(For all requirements, round your answers to 2 decimal places. (e.g., 32.16))
a. Inflation premium %
b. Fair interest rate %