A previously issued A2, 15-year industrial bond provides a return one-fourth hig

Question

A previously issued A2, 15-year industrial bond provides a return one-fourth higher than the prime interest rate of 8 percent. Previously issued A2 public utility bonds provide a yield of three-eighths of a percentage point higher than previously issued A2 industrial bonds of equal quality. Finally, new issues of A2 public utility bonds pay one-fourth of a percentage point more than previously issued A2 public utility bonds. What should be the interest rate on a newly issued A2 public utility bond?

Explanation / Answer

Previously issued A2 industrial bond = 8 + 0.25 =8.25

Previously issued A2 public utility bond = 8.25 + 0.375 = 8.625

New issues of A2 public utility bond = 8.625 + 0.25 = 8.875

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.