Question
YRW Corp. has a BBB credit rating and the firm is planning to issue 20-year bonds. The interest rate on 20-year Treasury bonds is 2.5%
| YRW Corp. has a BBB credit rating and the firm is planning to issue 20-year bonds. The interest rate on 20-year Treasury bonds is 2.5% and the default risk premium for BBB rated corporate bonds is 1.95%. The expected liquidity premium for YRW bonds is 0.71% and the maturity risk premium is the same as the maturity risk premium for Treasury bonds. What is the expected interest rate on the bonds the YRW Corp. will be issuing? |
| A. | 3.21% | |
| B. | 5.16% | |
| C. | 2.26% | |
| D. | 4.45% |
| YRW Corp. has a BBB credit rating and the firm is planning to issue 20-year bonds. The interest rate on 20-year Treasury bonds is 2.5% and the default risk premium for BBB rated corporate bonds is 1.95%. The expected liquidity premium for YRW bonds is 0.71% and the maturity risk premium is the same as the maturity risk premium for Treasury bonds. What is the expected interest rate on the bonds the YRW Corp. will be issuing? |
| A. | 3.21% | |
| B. | 5.16% | |
| C. | 2.26% | |
| D. | 4.45% |
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American Public School Finance
Authors: William Owings, Leslie Kaplan
2nd Edition
1111838046, 978-1111838041
