As of July 2009, Google (ticker: GOOG) had no debt. Suppose the firm were to issue $96 billion in zero-coupon senior debt, and another $32 billion in zero-coupon junior debt, both due in January 2011. Suppose Google had 320 million shares outstanding, trading at $422.27 per share, implying a market value of $135.1 billion. The risk-free rate over this horizon is 1.0 %. Use the option data in the table, to determine the rate Google would pay on the junior debt issue. (Assume perfect capital markets.)

The rate Google would pay on the junior debt issue is ____________%. (Round to one decimal place.)

OOG

422.27

+7.87
Jul 13 2009 @ 13:10 EST			Vol 2177516
Calls	Bid		Ask			Open Int
11 Jan 150.0 (OZF AJ)	273.60		276.90			100
11 Jan 160.0 (OZF AL)	264.50		267.520			82
11 Jan 200.0 (OZF AA)	228.90		231.20			172
11 Jan 250.00 (OZF AU)	186.50		188.80			103
11 Jan 280.0 (OZF AX)	162.80		165.00			98
11 Jan 300.0 (OZF AT)	148.20		150.10			408
11 Jan 320.0 (OZF AD)	133.90		135.90			63
11 Jan 340.0 (OZF AI)	120.50		122.60			99
11 Jan 350.0 (OZF AK)	114.10		116.10			269
11 Jan 360.0 (OZF AM)	107.90		110.00			66
11 Jan 380.0 (OZF AZ)	95.80		98.00			88
11 Jan 400.0 (OZF AU)	85.10		87.00			2577
11 Jan 420.0 (OZF AG)	74.60		76.90			66
11 Jan 450.0 (OZF AV)	61.80		63.30			379