1) Use the following information to draw securities market line
return on the market=12%
risk fee rate of return = 3%
2) You considering an investment in 30 year bounds issued by moore corporation. the bound have no special covenants. the wall street Journal reports that one year T- bills are currently earning 3.25% your broker determined the following information about economic activity and moore corporation's bonds
- real risk free rate=2.25%
- default risk premium=1.15%
- liquidity risk premium=0.50%
Maturity risk premium= 1.75%
Compute the inflaction premium?
What is the fair interest rate on Moore corporation 30 year bounds?