× Didn't find what you were looking for? Ask a question
  
  
Top Posters
Since Sunday
13
6
m
6
o
5
J
5
t
4
s
4
a
4
C
4
d
4
z
4
R
4
New Topic  
EpiscoWhat EpiscoWhat
wrote...
Posts: 268
Rep: 3 0
4 years ago
Rearden Metal has a bond issue outstanding with ten years to maturity, a yield to maturity of 8.6%, and a B rating.  The corresponding risk-free rate is 3% and the market risk premium is 6%.  Assuming a normal economy, the expected return on Rearden Metal's debt is closest to:
A) 0.6%   
B) 1.6%
C) 4.6%
D) 6.0%
Textbook 

Corporate Finance: The Core


Edition: 4th
Authors:
Read 146 times
5 Replies

Related Topics

Replies
wrote...
4 years ago
C
Explanation:  C) rd = rrf + β(rm - rrf) = 3% + 0.26(6%) = 4.56%
wrote...
4 years ago
Rearden Metal has a bond issue outstanding with ten years to maturity, a yield to maturity of 8.6%, and a B rating.  The bondholders expected loss rate in the event of default is 50%.  Assuming a normal economy the expected return on Rearden Metal's debt is closest to:
A) 0.6%   
B) 1.6%
C) 4.6%
D) 6.0%
wrote...
4 years ago
D
Explanation:  D) rd = ytm - prob(default) × loss rate = 8.6% - 5.2%(50%) = 6.00%
wrote...
4 years ago
Rearden Metal has a bond issue outstanding with ten years to maturity, a yield to maturity of 8.6%, and a B rating.  The bondholders expected loss rate in the event of default is 50%.  Assuming the economy is in recession, then the expected return on Rearden Metal's debt is closest to:
A) 0.6%   
B) 1.6%
C) 4.6%
D) 6.0%
wrote...
4 years ago
A
Explanation:  A) rd = ytm - prob(default) × loss rate = 8.6% - 16.0%(50%) = 0.6%
New Topic      
Explore
Post your homework questions and get free online help from our incredible volunteers
  117 People Browsing
 243 Signed Up Today
Related Images
 750
 182
 146
Your Opinion
Who's your favorite biologist?
Votes: 243

Previous poll results: Do you believe in global warming?