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Interest Rate and Bond Ratings

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A previously issued A2, 15-yr industrial bond provides a return 1/4th higher than the prime interest rate of 8%. Previously issued A2 public utility bonds provide a yield of 3/8ths of a percentage point higher than previously issued A2 industrial bonds of equal quality. Finally, new issues of A2 public utility bonds pay 1/4th of a percentage point more than previously issued A2 public utility bonds.

What should be the interest rate on a newly issued A2 public utility bond?

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This solution examines interest rate.

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Interest on Previously issued A2 15 yr industrial bond = Prime interest rate + ...

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