Rearden Metal Has a Bond Issue Outstanding with Ten Years

question 95

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 bondholders expected loss rate in the event of default is 50%.Assuming the economy is in recession,then the expected return on Rearden Metal's debt is closest to:

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

---

Definitions:

Direct Selling

A type of sales where products are marketed directly to consumers, bypassing traditional retail environments.

Nonstore Retailing

The selling of goods and services outside the traditional brick-and-mortar retail environment, such as through e-commerce, direct mail, or telemarketing.

Social Shopping Experience

A blend of social media and e-commerce where users can shop for products through social networking sites or engage in shopping as a social activity online.

Telemarketing

The direct marketing of goods or services to potential customers over the telephone or the Internet.