Question

O Not secure lectures.mhhe.com/connect/... Consider the table given below to answer the first question (Shares and market values in millions.): Number of Shares Stock Price х Market Capitalization $ 467 71.00 X $ 6.58 = 70.34 Callaway Golf (ELY) Alaska Air Group (ALK) Estée Lauder (EL) Yum! Brands (YUM) General Electric (GE) $57.50 $65.70 $ 4,045 $ 23,373 355.75 450.73 X $ 67.72 $ 30,523 10.398.00 х $23.77 $247,160 TABLE 2.2 Interest rates on long-term corporate bonds, July 2013. The interest rate is lowest for top-quality (AAA) issuers.The rate rises as credit quality declines. Credit Rating AAA AA Interest Rate 3.35% 3.93 4.28 5.08 5.27 6.35 BBB BB B Source: Thomson Reuters b. The rating agency has revised Catalytic Concept's bond rating to AAA (Use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? (Enter your answer as a percent rounded to 2 decimal places.) Interest rate

Answer 1

If the rating is assigned at highest credit rating of AAA as per the chart, the interest rate should be 3.35%