James, Inc. has zero-coupon outstanding debt maturing in 8 years. In rank of seniority, each pays at maturity $20 million, $15 million, and $40 million
Assume asset value = $60 million, r = 0.05, ? = 0.28, and no dividend is paid. What is the yield on the $15 million subordinate debt?
A)
5.72%
B)
6.72%
C)
7.72%
D)
8.72%
Answer:
B
Business
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