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 3.50 percent. Your broker has determined the following information about economic activity and the corporation bonds:
Real Interest Rate=2.50%
Default risk premium=1.75%
Liquidity risk premium=0.70%
Maturity risk premium= .50%
What is the inflation premium? What is the fair interest rate on the corporations 30 year bonds?