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October 25, 2014

Homework Help: Finance

Posted by Rajini on Wednesday, April 11, 2007 at 9:57pm.

Rollincoast Incorporated issued BBB bonds two years ago that provided a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at that time. The current risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the risk-free long-term government bonds are currently yielding 7.8%, then at what rate should Rollincoast expect to issue new bonds? (Points: 4)
7.8%
8.7%
9.2%
10.2%
12.9%

9.2

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