The US Government is forecasting that the nominal risk-free rate of return on Treasury Notes maturing in 7 years is 2.5% and is expected to be constant for the foreseeable future. Apple Computer's Treasury department is considering issuing a 7 year corporate bond and they know that Apple's corporate bonds generally yield investors 100 basis points or 1% over the nominal risk free rate at the time of issuance. The bonds will be issued at par value. What is the coupon percentage and total yield expected on these new 7 year bonds?
a. 3.5%
b. 10%
c. 2.5
d. Cannot determine
Answers: 2
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