Use the Following Information to Answer the Question(s)below

question 58

Multiple Choice

Use the following information to answer the question(s) below.Consider the following information regarding corporate bonds:
-Wyatt Oil has a bond issue outstanding with seven years to maturity,a yield to maturity of 7.0%,and a BBB rating.The corresponding risk-free rate is 3% and the market risk premium is 5%.Assuming a normal economy,the expected return on Wyatt Oil's debt is closest to:

• A)3.0%.
• B)3.5%.
• C)4.9%.
• D)5.5%.

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Definitions:

Interest-Rate Cost

The cost associated with borrowing funds, typically expressed as a percentage of the total amount loaned.

Expected Rate

Expected rate often refers to the anticipated return on an investment or the predicted growth rate of an economic variable over a certain period.

Optimal Amount

The most efficient, beneficial, or ideal quantity of a good, service, or resource allocation under given circumstances.

Perfectly Elastic

Describes a situation in economics where the quantity demanded or supplied changes infinitely in response to any change in price.