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The US Government is forecasting that the nominal risk-free rate of return on Treasury Notes maturing in 7 years is 2.5% and is expected to be constant for the foreseeable future. Apple Computer's Treasury department is considering issuing a 7 year corporate bond and they know that Apple's corporate bonds generally yield investors 100 basis points or 1% over the nominal risk free rate at the time of issuance. The bonds will be issued at par value. What is the coupon percentage and total yield expected on these new 7 year bonds?
a. 3.5%
b. 10%
c. 2.5
d. Cannot determine

Respuesta :

jepessoa

Answer:

a. 3.5%

Explanation:

If the nominal interest rate of the Treasury bonds is 2.5%, and Apple's corporate bonds yield 1%, just add 2.5% + 1% = 3.5%.

when you are talking about bonds, 100 points = 1%. This many times confuses people that are not aware of this since you hear that a bond will pay 50 points more and you imagine a really high interest rate.

t1lt3dwastaken

Answer:

A

Explanation: