1. Bonds with a rating of AAA through BBB- are called ________, while bonds with ratings...
1. Bonds with a rating of AAA through BBB- are called ________, while bonds with ratings BB or below are called _________.
Homework Answers
Bonds with a rating of AAA through BBB- are called investment grade bonds,
Whille bonds with ratings BB or below are called non - investment grade bonds (or junk bonds).
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1. Bonds with a rating of AAA through BBB- are called ________, while bonds with ratings...
Credit Rating Yield AAA 3% AA 3.2% A 3.5% BBB 3.8% BB 4.5% B 5.25% a....
Credit Rating Yield AAA 3% AA 3.2% A 3.5% BBB 3.8% BB 4.5% B 5.25% a. Given the yields for bonds with different credit ratings, what would be the fair price of a 5-year maturity bond, which currently has identical risk to a bond rated ‘A’, if it has a coupon rate of 12% paid annually, and a par value of $1,000? b. What would be the price of the bond 3 years from today if the bond is expected...
QUESTION 4 Consider the following information regarding corporate bonds: Rating AAA AA A T IAA BBB...
QUESTION 4 Consider the following information regarding corporate bonds: Rating AAA AA A T IAA BBB BB CCC Average Default Rate 0.0% 0.0% 0.296 0,496 2.196 5.296 9.996 Recession Default Rate 0.096 1.09 3.0% 3.096 8.0% 16.096 43.096 Average Beta 0.05 0.05 0.05 0.10 0.17 0.26 10.31 Equity Debt Rating BBB Company Market Capitalisation Total Enterprise Value ($mm) ($mm) Taggart $4,500 8,000 Transcontinental Rearden Metal $3,800 7.200 Wyatt Oil $2,400 3,800 Nielson Motors $1,500 4,400 Your estimate of the asset...
Using calculating formula Credit Rating Yield AAA 3% AA 3.2% A 3.5% BBB 3.8% BB 4.5%...
Using calculating formula Credit Rating Yield AAA 3% AA 3.2% A 3.5% BBB 3.8% BB 4.5% B 5.25% a. Given the yields for bonds with different credit ratings, what would be the fair price of a 5-year maturity bond, which currently has identical risk to a bond rated ‘A’, if it has a coupon rate of 12% paid annually, and a par value of $1,000? b. What would be the price of the bond 3 years from today if the...
bonds with relatively low risk of default are called 1) Bonds with relatively low risk of...
bonds with relatively low risk of default are called
1) Bonds with relatively low risk of default are called securities and have a rating of Baa (or BBB) a above; bonds with ratings below Baa (or BBB) have a higher default risk and are called A) investment grade; lower grade C) high quality; lower grade B) investment grade; junk bonds D) high quality; junk bonds 2) Which of the following bonds are considered to be default-risk free? A) municipal bonds...
19) curity: AAA Corporate 56 AA Corporate A Corporate BBB Corporate BB Corporate ield (%): A...
19) curity: AAA Corporate 56 AA Corporate A Corporate BBB Corporate BB Corporate ield (%): A mining company needs to raise $100 million in order to begin open-pit mining of a coal seam. The company will fund this by issuing 30-year bonds with a face value of $1,000 and a coupon rate of 6.5%, paid annually. The above table shows the yield to maturity for similar 30-year corporate bonds of different ratings. If the company's bonds are rated A, what...
Consider the following information: BB BBB AA AAA Rating 12.2% 5.5% 2.2% 0.45% 0.2% 0.1% 0.0%...
Consider the following information: BB BBB AA AAA Rating 12.2% 5.5% 2.2% 0.45% 0.2% 0.1% 0.0% Average Default Rate 48.0% 16.0% 8.0% 3.0% 3.0% 1.0% Recession Default Rate 0.0% 0.31 0.26 0.17 0.05 0.10 0.05 0.05 Average Beta Debt Rating Total Enterprise Value ($mm) Equity Beta Market Company Capitalization (Smm) Taggart Transcontinental 4500 8000 1.1 BBB Rearden Metal 3800 7200 1.3 AAA Wyatt Oil 2400 3800 0.9 Nielson Motors 1500 4400 1.75 BB What is your estimate of the debt...
Which of the following bond ratings indicate junk bonds? A/A Baa/BBB Ba/BB B/B Both c. and...
Which of the following bond ratings indicate junk bonds? A/A Baa/BBB Ba/BB B/B Both c. and d.
Security: AAA Corporate AA Corporate A Corporate BBB Corporate BB Corporate Yield (%): 5.6 5.7 6...
Security: AAA Corporate AA Corporate A Corporate BBB Corporate BB Corporate Yield (%): 5.6 5.7 6.1 6.4 7.0 A mining company needs to raise $100 million in order to begin open-pit mining of a coal seam. The company will fund this by issuing 30-year bonds with a face value of $1,000 and a coupon rate of 6.5%, paid annually. The above table shows the yield to maturity for similar 30-year corporate bonds of different ratings. If the company's bonds are...
5. Why are bond ratings important? A. A bond rating is an indicator of its default...
5. Why are bond ratings important? A. A bond rating is an indicator of its default risk, has a direct influence on the bond’s interest rate and the firm’s cost of debt B. Higher-grade bonds have a higher required rate of return C. Institutional bond holders are usually not allowed to buy bonds who ratings are below BBB D. A and C above
find the approximate spread between AAA and BBB rated bonds. There are many sources you can...
find the approximate spread between AAA and BBB rated bonds. There are many sources you can utilize to find this data. Discuss why this spread exists. If a AAA and BBB rated bond have the same duration and convexity will they have the same level of interest rate risk? Why or why not?
QUESTION 4 Consider the following information regarding corporate bonds: Rating AAA AA A T IAA BBB BB CCC Average Default Rate 0.0% 0.0% 0.296 0,496 2.196 5.296 9.996 Recession Default Rate 0.096 1.09 3.0% 3.096 8.0% 16.096 43.096 Average Beta 0.05 0.05 0.05 0.10 0.17 0.26 10.31 Equity Debt Rating BBB Company Market Capitalisation Total Enterprise Value ($mm) ($mm) Taggart $4,500 8,000 Transcontinental Rearden Metal $3,800 7.200 Wyatt Oil $2,400 3,800 Nielson Motors $1,500 4,400 Your estimate of the asset...
bonds with relatively low risk of default are called
1) Bonds with relatively low risk of default are called securities and have a rating of Baa (or BBB) a above; bonds with ratings below Baa (or BBB) have a higher default risk and are called A) investment grade; lower grade C) high quality; lower grade B) investment grade; junk bonds D) high quality; junk bonds 2) Which of the following bonds are considered to be default-risk free? A) municipal bonds...
19) curity: AAA Corporate 56 AA Corporate A Corporate BBB Corporate BB Corporate ield (%): A mining company needs to raise $100 million in order to begin open-pit mining of a coal seam. The company will fund this by issuing 30-year bonds with a face value of $1,000 and a coupon rate of 6.5%, paid annually. The above table shows the yield to maturity for similar 30-year corporate bonds of different ratings. If the company's bonds are rated A, what...
Consider the following information: BB BBB AA AAA Rating 12.2% 5.5% 2.2% 0.45% 0.2% 0.1% 0.0% Average Default Rate 48.0% 16.0% 8.0% 3.0% 3.0% 1.0% Recession Default Rate 0.0% 0.31 0.26 0.17 0.05 0.10 0.05 0.05 Average Beta Debt Rating Total Enterprise Value ($mm) Equity Beta Market Company Capitalization (Smm) Taggart Transcontinental 4500 8000 1.1 BBB Rearden Metal 3800 7200 1.3 AAA Wyatt Oil 2400 3800 0.9 Nielson Motors 1500 4400 1.75 BB What is your estimate of the debt...
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