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Question
Reliable Metals plans to issue bonds that will mature in 20 years, will have a semi-annual coupon rate of 7%., and a Moody's rating of Aa2. Bonds of other metals companies with similar maturities and ratings currently yield an average of 6.3%.A) Reliable's bonds will sell at a price to yield about 6.3% because that is the investors' opportunity cost.
B) Reliable's bonds should be priced to yield a rate close to the coupon rate.
C) Reliable's bonds should yield more than 6.3% because they are new.
D) Reliable's bonds should yield less than 6.3% because they are new.
Answer
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