Chapter 3 Impact of Financing on Investment Decisions and ...

The credit spread on a 10 year AA bond is 52, which means that 0.52% should be added to the return on the government bond. Expected yield on ABC Co.’s bonds = 4.2% + 0.52% = 4.72% Example 9 – Yield on corporate bond A 15 year government bond has a current yield of 5%. BBC Co., a B rated company, has equivalent bonds in issue. ................
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