Interest rate on a newly issued a2 public utility bond

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A previously issued A2, 15-year industrial bond provides a return 50% higher than the prime interest rate of 7 percent. Previously issued A2 public utility bonds provide a yield of one-fourth of a percentage point higher than previously issued A2 industrial bonds of equal quality. Finally, new issues of A2 public utility bonds pay one-half of a percentage point more than previously issued A2 public utility bonds.

What should be the interest rate on a newly issued A2 public utility bond?

Reference no: EM132419835

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