Nielson Motors Plans to Issue 10-Year Bonds That It Believes

question 52

Multiple Choice

Nielson Motors plans to issue 10-year bonds that it believes will have an BBB rating.Suppose AAA bonds with the same maturity have a 3.5% yield.Assume that the market risk premium is 5% and the expected loss rate in the event of default on the bonds is 60%.The yield that these bonds will have to pay during a recession is closest to:

• A)3.50%.
• B)3.75%.
• C)4.00%.
• D)5.55%.

---

Definitions:

Action Potential

A short-lasting event in which the electrical membrane potential of a cell rapidly rises and falls, allowing neurons to communicate.

Potassium Ions

Positively charged atoms that are essential for various physiological processes in living organisms, including nerve impulse transmission and muscle contraction.

Sodium Channels

Membrane proteins involved in the conduction of sodium ions through neuronal and muscle cell membranes, crucial for generating electrical signals.

Voltage-gated Channels

Protein channels that open or close in response to changes in membrane potential, allowing ions to enter or exit cells and facilitate electrical signaling.