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EpiscoWhat EpiscoWhat
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6 years ago
Nielson Motors plans to issue 10-year bonds that it believes will have an BBB rating.  Suppose AAA bonds with the same maturity have a 3.5% yield.  Assume that the market risk premium is 5% and the expected loss rate in the event of default on the bonds is 60%.  The yield that these bonds will have to pay during average economic times is closest to:
A) 3.50%
B) 3.75%
C) 4.00%
D) 5.50%
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
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anicidanicid
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