Rearden Metal Has a Bond Issue Outstanding with Ten Years

Multiple Choice

Rearden Metal has a bond issue outstanding with ten years to maturity,a yield to maturity of 8.6%,and a B rating.The bondholders' expected loss rate in the event of default is 50%.Assuming a normal economy,the expected return on Rearden Metal's debt is closest to:

A) 0.6%.
B) 1.6%.
C) 4.6%.
D) 5.9%.