Interest Premium Shaky Company has just issued a five- year bond with a yield of 9% while Stable Company has issued an identical five-year bond but with a yield of 7%. Why did the market demand a higher return from Shaky?
Interest Premium Shaky Company has just issued a five- year bond with a yield of 9% while Stable Company has issued an identical five-year bond but with a yield of 7%. Why did the market demand a higher return from Shaky?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Interest
Premium
Shaky
Company has just issued a five-
year bond with a yield of 9% while
Stable Company has issued an
identical five-year bond but with a
yield of 7%. Why did the market
demand a higher return from
Shaky?
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