The market wide interest rate for companies with similar, Financial Management

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The market wide interest rate for companies with similar

1. Assume that for some period of time corporate bonds had an average rate of return of 5.4% while Treasury bills returned 2.8% and inflation averaged 2.7%. Given these assumptions, what is the risk premium on corporate bond?

2. Your company issues 10-year bonds with a face value of $1,000 at a 7% coupon rate. The market wide interest rate for companies with similar default risk is 9%. What is your company’s cost of debt?

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Financial Management: The market wide interest rate for companies with similar

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