Perpetual Motors plans to issue 10-year bonds that it believes will have a BBB rating. Suppose AAA bonds with the same maturity have a 2% yield. Assume that the market risk premium is 5% and the expected loss rate in the event of default on the bonds is 65%. The yield that these bonds will have to pay during average economic times is closest to: A.2.50% B.4.50% C.3.50% D.4.00%

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