Quest Parts Part A Three years ago, you purchased an 8 year bond issued by Thrumbauer Inc. for At that time the bond had a BBB credit rating. (i) What interest rate (\%/year) did this bond yield when you purchased it? (ii) What is the risk premium on the 8 year Thrumbauer bonds? oday, three years later, yields on US Treasuries are as shown below. ) Should its risk premium today be: Thoose one and expalin your answer. i) Using the risk premium selected above, what would be the interest (yield) on Thrombauer's bond today? ii) What would be the price of the bond today? (ii) Using the risk premium selected above, what would be the interest (yield) on Thrombauer's bond today? (iii) What would be the price of the bond today? (iv) What would be your return (\%/year) if you sold the bond at this price? PART C Delford Industries needs a new warehouse for its growing business in New Jersey. The CFO has decided to lease the warehouse for 7 years. 2 They have identified two warehouses that meet their needs: one in Edison and the other in Rutherford. Proposed lease terms for the two warehouses are as shown below. ($sin000s)EdisonRutherfordPayment(Year0)$325$925AnnualLease$1,235$1,125 Delford has adequate cash to make either of the Year 0 payments. Which should the CFO choose? Explain your answer Quest Parts Part A Three years ago, you purchased an 8 year bond issued by Thrumbauer Inc. for At that time the bond had a BBB credit rating. (i) What interest rate (\%/year) did this bond yield when you purchased it? (ii) What is the risk premium on the 8 year Thrumbauer bonds? oday, three years later, yields on US Treasuries are as shown below. ) Should its risk premium today be: Thoose one and expalin your answer. i) Using the risk premium selected above, what would be the interest (yield) on Thrombauer's bond today? ii) What would be the price of the bond today? (ii) Using the risk premium selected above, what would be the interest (yield) on Thrombauer's bond today? (iii) What would be the price of the bond today? (iv) What would be your return (\%/year) if you sold the bond at this price? PART C Delford Industries needs a new warehouse for its growing business in New Jersey. The CFO has decided to lease the warehouse for 7 years. 2 They have identified two warehouses that meet their needs: one in Edison and the other in Rutherford. Proposed lease terms for the two warehouses are as shown below. ($sin000s)EdisonRutherfordPayment(Year0)$325$925AnnualLease$1,235$1,125 Delford has adequate cash to make either of the Year 0 payments. Which should the CFO choose? Explain your
