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CPA Company is planning to raise $200 million by selling 10-year bonds. The bond rating agency has advised the company that the bonds will have an A rating. Currently, the difference between the yield to maturity of A-rated corporate bonds over similar-maturity Government of Canada bonds is 125 basis points (1 basis point equals .01 percentage points). If 10-year Canada bonds are currently priced to yield 5%, what coupon rate should CPA Company select if the new issue is to sell at par value?

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Financial Management, Finance

Category:- Financial Management
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