During the recession in mid-2009, homebuilder KB Home had outstanding 7-year bonds with a yield to maturity

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During the recession in mid-2009, homebuilder KB Home had outstanding 7-year bonds with a yield to maturity of 8.7% and a BB rating. If corresponding risk-free rates were 3.5%, and the market risk premium was 5.1%, estimate the expected return of KB Home’s debt using two different methods. How do your results compare?

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Corporate Finance The Core

ISBN: 9781292158334

4th Global Edition

Authors: Jonathan Berk, Peter DeMarzo

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