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    The expected rate to issue new bonds

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    Jim's Tire 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 Jim's Tire expect to issue new bonds?

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    https://brainmass.com/business/bond-valuation/the-expected-rate-to-issue-new-bonds-343884

    Solution Preview

    YTM on BBB bonds = 11.5%
    Long-term risk-free government bonds = 8.7%
    Risk ...

    Solution Summary

    This post discusses what is the expected rate to issue new bonds, if the risk-free long-term government bonds are currently yielding 7.8%

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