Question
Rollincoast Incorporated issued BBB bonds two years ago offering a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at the time.
Rollincoast Incorporated issued BBB bonds two years ago offering a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at the time. The current risk premium for BBB bonds against government bonds is half what it was two years ago. If risk-free long-term government bonds currently yield 7.8%, at what rate should Rollincoast expect to issue new bonds?
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To calculate the rate at which Rollincoast should expect to issue new bonds we need to first calcula...
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Introduction To Corporate Finance
Authors: Laurence Booth, Sean Cleary
3rd Edition
978-1118300763, 1118300769
