Management of Southern Parts Company has decided to sell 10-year bonds to finance expansion into the Pacific
Question:
Management of Southern Parts Company has decided to sell 10-year bonds to finance expansion into the Pacific Northwest. The loan rate on these bonds is 8 percent and the 3-month Treasury bill rate is 2.1 percent. The firm’s credit rating is B, and the yield on 10-year Treasury bonds is 2.5 percent higher than that on 3-month Treasury bills. How much of a premium over the 10-year Treasury bond are these Southern Parts bonds selling for?
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-1119371403
4th edition
Authors: Robert Parrino, David S. Kidwell, Thomas Bates
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