(SOLVED) Big Time Company is planning to raise 15 million by


Question Description:

$15

Big Time Company is planning to raise $15 million by selling 10-year bonds. The bond rating agency has advised the company that the bonds will have an A rating. Currently, the difference between the yield to maturity of A-rated corporate bonds over similar-maturity Government of Canada bonds is 150 basis points (1 basis point equals .01 percentage points). If 10-year Canada bonds are currently priced to yield 5%, what coupon rate should Big Time select if the new issue is to sell at par value?

Answer

$15