Rollincoast Inc issued BBB Bonds 2 years ago that provided a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at that time The current risk premium on BBB bonds versus government bonds is half of what it was 2 years ago. If the risk free long term government bonds are currently yielding 7.8%, then at what rate should Rollincoast expect to issue new bonds?
I know that the answer is supposed to be 9.2%, I am really stuck on where to begin, so if I could get a push in the right direction, that would be great!
I know that the answer is supposed to be 9.2%, I am really stuck on where to begin, so if I could get a push in the right direction, that would be great!
