Top Posters
Since Sunday
j
15
m
15
a
15
Y
14
13
m
13
s
13
J
13
L
12
a
12
j
12
e
12

"Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity"

wrote...
Posts: 268
Rep: 3 0
A year ago
Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating.  The corresponding risk-free rate is 3% and the market risk premium is 5%.  Assuming a normal economy, the expected return on Wyatt Oil's debt is closest to:
A) 3.0%
B) 3.5%
C) 4.9%
D) 5.5%
Textbook

Corporate Finance: The Core

Edition: 4th
Authors:
Read 84 times
6 Replies
Replies
Answer verified by a subject expert
wrote...
Posts: 439
Rep: 2 0
A year ago
 Sign in or Sign up in seconds to unlock everything.

Related Topics

wrote...
A year ago
 Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The bondholders' expected loss rate in the event of default is 70%.  Assuming a normal economy the expected return on Wyatt Oil's debt is closest to:A) 3.0%   B) 3.5%C) 4.9%D) 6.7%
wrote...
A year ago
 DExplanation:  D) rd = ytm - prob(default) × loss rate = 7% - 0.4%(70%) = 6.72%
wrote...
A year ago
 Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The bondholders' expected loss rate in the event of default is 70%.  Assuming the economy is in recession, then the expected return on Wyatt Oil's debt is closest to:A) 3.5%B) 4.9%C) 5.5%D) 7.0%
wrote...
A year ago
 BExplanation:  B) rd = ytm - prob(default) × loss rate = 7% - 3.0%(70%) = 4.9%
wrote...
A year ago
 Thanks for helping with my corporate finance course
 [center][color=gray]Please [b]login or register[/b] to leave a reply[/color][/center]
Explore
Post your homework questions and get free online help from our incredible volunteers.
Learn More
Improve Grades
Save Time
Accessible 24/7
137 People Browsing
134 Signed Up Today
Your Opinion
Which of the following is the best resource to supplement your studies:
Votes: 54

Related Images
3387
68
36
Latest Blogs