A municipal bond service has three rating categories (A, B, and C). Suppose that in the past year, of the municipal bonds issued throughout the United States, 70% were rated A, 20% were rated B, and 10% were rated C.
• Of the municipal bonds rated A, 50% were issued by cities, 40% were issues by suburbs, and 10% were issued by rural areas.
• OF the municipal bonds rated B, 60% were issued by cities, 20% were issued by suburbs, and 20% were issued by rural areas.
• Of the municipal bonds rated C, 90% were issued by cities, 5% were issued by suburbs, and 5% were issued by rural areas.
Desired Probability,
So,
Option D is correct.
**If the answer does not match please comment.
A municipal bond service has three rating categories (A, B, and C). Suppose that in the...
2. A municipal bond services has three rating categories (A,B,C). Suppose that in the past year, of the municipal bonds issues throughout the United States, 70% were rated A, 20% were rated B, and 10% were rated C. Of the municipal bonds rated A, 50% were issued by cities,40% by suburbs, and 10% by rural areas. Of the municipal bonds rated B, 60% were issued by cities, 20% by suburbs, and 20% by rural areas. Of the municipal bonds rated...
Use the following information to answer questions 24 – 26. Use 3 decimals. A municipal bond service has three rating categories (A, B, and C). Suppose that in the past year, of the municipal bonds issued throughout the United States, 70% were rated A, 20% were rated B, and 10% were rated C. Of the municipal bonds rated A, 50% were issued by cities, 40% were issues by suburbs, and 10% were issued by rural areas. OF the municipal bonds...
The yield to maturity for 10-year bonds is as follows for four different bond rating categories: Aaa 9.40% Aa2 10.00% Aa1 9.60% Aa3 10.60% The bonds of Falter Corporation were rated as Aaa and issued at par a few weeks ago. The bonds have just been downgraded to Aa2. Determine the new price of the bonds, assuming a 10-year maturity and semiannual interest payments. (Refer to “Semiannual Interest and Bond Prices” in Chapter 10 for a review if necessary.)
The yield to maturity for 25-year bonds is as follows for four different bond rating categories. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Aaa 9.60% Aa1 9.80% Aa2 10.00% Aa3 11.20% The bonds of Falter Corporation were rated as Aaa and issued at par a few weeks ago. The bonds have just received a new rating of Aa2. Determine the new price of the bonds,...
Indicate which bond in the following pairs of bonds is likely to bear the higher interest rate (yield) and state why. If there is no general reason for a difference, indicate that they would be the same. a. A corporate bond rated Aaa or a municipal bond rated Aaa b. a municipal bond rated Baa or a municipal bond rate Aa c. A general obligation bond issued by a city or a revenue bond issued by a city d. a...
The yield to maturity for 25-year bonds is as follows for four different bond rating categories. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Aaa 10.00% Aa1 10.60% Aa2 11.00% Aa3 11.40% The bonds of Falter Corporation were rated as Aa2 and issued at par a few weeks ago. The bonds have just been downgraded to Aaa. Determine the new price of the bonds, assuming a...
Information Related to Various Bond Issues) Karen Austin Inc. has issued three types of debt on January 1, 2020, the start of the company's fiscal year. a. $10 million, 10-year, 15% unsecured bonds, interest payable quarterly. Bonds were priced to yield 12%. b. $25 million par of 10-year, zero-coupon bonds at a price to yield 12% per year. c. $20 million, 10-year, 10% mortgage bonds, interest payable annually to yield 12%. Instructions Prepare a schedule that identifies the following items for each bond:...
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Packer has a fixed income portfolio that consists of Bond A, Bond B, and Bond C. The bonds have durations of 4, 6 and 10, respectively. If Packer has 50% invested in Bond A and 25% invested in each of the other two bonds, what is the duration for the portfolio? Assume that the correlation between the bonds is 0.5. A. 5,5 B. 6.0 C. 6.7 D. 7.2
Determining Bond Selling Price Calculate the bond selling price for the three separate scenarios that follow. a. 33M Corp. authorized and issued $200,000, 6%, 20-year bonds payable on January 1, 2020. Calculate the selling price of the bonds if the bonds pay cash interest semiannually on July 1 and January 1, and the market rate of interest on similar bonds is 896. b. 33M Corp. authorized and issued $500,000, 796, 10-year bonds payable on January 1, 2020. Calculate the selling...