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c. Suppose investors require an expected (average) rate of return of 5%.4Supposethe recovery rates for senior and junior bonds are 70% and 30%, respectively. Assume
c. Suppose investors require an expected (average) rate of return of 5%.4Supposethe recovery rates for senior and junior bonds are 70% and 30%, respectively. Assume bond prices are determined such that all bonds expected returns exactly equal 5%. What will be the interest rates of the senior and junior bonds, respectively?
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