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 = T-bill interest - risk free rate
=0.30% - 0.21%
=0.09%
b.
Fair interest rate = T-bill int rate + Default risk premium +Liquidity risk premium + Maturity risk premium
=0.30 + 1.15 + 0.80 + 0.75
=3%
You are considering an investment in 20-year bonds issued by Moore Corporation. The bonds have no...
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 3.25 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 2.25 % Default risk premium = 1.15 % Liquidity risk premium = 0.50 % Maturity risk premium = 1.75 % a. What is the inflation premium? b. What is the fair...
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 1.30 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.70% Default risk premium = 1.20% Liquidity risk premium = 0.60% Maturity risk premium = 1.80% What is the inflation premium? (Round your answer to 2 decimal places.) What is the...
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 1.50 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.50% Default risk premium = 1.40% Liquidity risk premium = 1.00% Maturity risk premium = 2.00% a. What is the inflation premium? (Round your answer to 2 decimal places.)...
Problem 2-2 (LG 2-6) 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 0.40 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate Default risk premium Liquidity risk premium Maturity risk premium - - - - 0.32% 1.05% 0.70% 0.65% a. What is the inflation premium? b. What is the fair...
3) You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants (no special provision premium). The 1-year T-bills are currently earning 3. 5%. You have the following information: Real risk-free rate = 1.25%, Default risk premium = 1.25%, Liquidity risk premium = 0.5%, Maturity risk premium = 1.75%. a) What is the inflation premium? b) What is the fair interest rate on Moore Corporation 30-year bonds?
3You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants (no special provision premium). The 1-year T-bills are currently earning 3. 5% You have the following information: Real risk-free rate 1.25 % , Default risk premium- 1.25% Liquidity risk premium - 0.5 % , Maturity risk premium 1.75 %. a) What is the inflation premium? b) What is the fair interest rate on Moore Corporation 30-year bonds?
Help ctmh oblems Help Save& Exit Subm Check my work 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 1.30 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate: 0.70% Liquidity risk premium a: O.60% Maturity risk premium-1.80% a. What is the inflation premium? (Round your answer to 2 decimal places.)...
Chapter 6 HW 30 points Saved Help Save & Exit Submit Check my work Problem 6-2 Determinants of Interest Rates for Individual Securities (LG6-6) points 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 2.25 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Skipped eBook Real risk-free rate = 0.85% Default risk premium...
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Dakota Corporation 15-year bonds have an equilibrium rate of return of 10 percent. For all securities, the inflation risk premium is 1.45 percent and the real risk-free rate is 2.90 percent. The security’s liquidity risk premium is 0.55 percent and maturity risk premium is 1.15 percent. The security has no special covenants. Calculate the bond’s default risk premium. (Round your answer to 2 decimal places.)