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6. Moore Corporation has 6-year bonds. Inflation premium (IP) on a 6year bond is 1.00%. The real risk-free rate is r* = 2.80%
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Answer:

From the given data we find thr formula for MRP as

MRP = (t - 1) * 0.10%, where t = number of years to maturity
MRP= (6 - 1) * 0.10%
MRP= 0.50%

Yield on 6-year Bonds = Real Risk-free Rate + Inflation Premium + Default Risk Premium + Liquidity Premium + Maturity Risk Premium
Yield on 6-year Bonds = 2.80% + 1.00% + 0.85% + 1.20% + 0.50%
Yield on 6-year Bonds = 6.35%

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