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Category > Business & Finance Posted 18 May 2017 My Price 8.00

The Debt Cost of Capital

The Debt Cost of Capital

In mid-2012, Ralston Purina had AA-rated, 10-year bonds outstanding with a yield to maturity of 2.05%.

a. What is the highest expected return these bonds could have?

b. At the time, similar maturity Treasuries have a yield of 1.5%. Could these bonds actually have an expected return equal to your answer in part (a)?

c. If you believe Ralston Purina’s bonds have 0.5% chance of default per year, and that expected loss rate in the event of default is 60%, what is your estimate of the expected return for these bonds

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Status NEW Posted 18 May 2017 04:05 AM My Price 8.00

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