Rearden Metal Has a Bond Issue Outstanding with Ten Years

question 12

Multiple Choice

Rearden Metal has a bond issue outstanding with ten years to maturity,a yield to maturity of 8.6%,and a B rating.The corresponding risk-free rate is 3% and the market risk premium is 6%.Assuming a normal economy,the expected return on Rearden Metal's debt is closest to:

• A)0.6%.
• B)1.6%.
• C)4.6%.
• D)6.0%.