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 bond is expected to be downgraded to ‘BBB’ at the end of the 3rd year?
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Using calculating formula Credit Rating Yield AAA 3% AA 3.2% A 3.5% BBB 3.8% BB 4.5%...
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...
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...
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...
HMK Enterprises would like to raise $14 million to invest in capital expenditures. The company plans...
HMK Enterprises would like to raise $14 million to invest in
capital expenditures. The company plans to issue five-year bonds
with a face value of $1,000 and a coupon rate of 3.5% (annual
payments). The following table summarizes the yield to maturity
for five-year (annual-pay) coupon corporate bonds of various
ratings.
Rating
AAA
AA
A
BBB
BB
YTM (%)
3.03.0
3.13.1
3.53.5
3.93.9
4.34.3
a. Assuming the bonds will be rated AA, what will the price of
the AA-rated bonds...
35. Credit Risk. A bond's credit rating provides a guide to its risk. Suppose that long-term...
35. Credit Risk. A bond's credit rating provides a guide to its risk. Suppose that long-term bonds rated Aa currently offer yields to maturity of 7.5%. A-rated bonds sell at yields of 7.8%. Sud- pose that a 10-year bond with a coupon rate of 7.6% is downgraded by Moody's from an Aa to A rating. (L06-5) a. Is the bond likely to sell above or below par value before the downgrade? b. Is the bond likely to sell above or...
just question 35 35. Credit Risk. A bond's credit rating provides a guide to its risk....
just question 35
35. Credit Risk. A bond's credit rating provides a guide to its risk. Suppose that long-term bonds rated Aa currently offer yields to maturity of 7.5%. A-rated bonds sell at yields of 7.8%. Sup. pose that a 10-year bond with a coupon rate of 7.6% is downgraded by Moody's from an Aato A rating. (L06-5) a. Is the bond likely to sell above or below par value before the downgrade? b. Is the bond likely to sell...
The following table summarizes the yields to maturity on several one-year, zero coupon securities: Security yield...
The following table summarizes the yields to maturity on several one-year, zero coupon securities: Security yield Treasury 3.15 AAA corporate 3.23 BBB corporate 4.27 B corporate 4.94 A. What is the price(expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating? B. What is the credit spread on AAA-rated corporate bonds? C. What is the credit spread on B-rated coporate bonds? D. How does this credit spread change with the bond rating?...
10. Bond ratings Aa Aa Rating agencies-such as Standard & Poor's (S&P), Moody's Investor Service, and...
10. Bond ratings Aa Aa Rating agencies-such as Standard & Poor's (S&P), Moody's Investor Service, and Fitch Ratings-assign credit ratings to bonds based on both quantitative and qualitative factors. These ratings are considered indicators of the issuer's default risk, which impacts the bond's interest rate and the issuer's cost of debt capital. Based on these ratings, bonds are classified into investment-grade bonds and junk bonds. Which of the following bonds is likely to be classified as a junk bond? OA...
A corporate bond with a 5 percent coupon has 10 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 8.0 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The new
A corporate bond with a 5 percent coupon has 10 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 8.0 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The new appropriate discount rate will be 9 percent. What will be the change in the bond's price in dollars? Assume interest payments are paid semiannually and par value is $1,000.
A corporate bond with a 5.75 percent coupon has 15 years left to maturity. It has had a credit rating of BB and a yield to maturity of 6.25 percent. The firm has recently gotten more financially stable and the rating agency is upgrading the bonds to BBB.
A corporate bond with a 5.75 percent coupon has 15 years left to maturity. It has had a credit rating of BB and a yield to maturity of 6.25 percent. The firm has recently gotten more financially stable and the rating agency is upgrading the bonds to BBB. The new appropriate discount rate will be 6.00 percent. What will be the change in the bond's price in dollars? (Assume interest payments are paid semiannually and a par value of $1,000.)
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...
HMK Enterprises would like to raise $14 million to invest in
capital expenditures. The company plans to issue five-year bonds
with a face value of $1,000 and a coupon rate of 3.5% (annual
payments). The following table summarizes the yield to maturity
for five-year (annual-pay) coupon corporate bonds of various
ratings.
Rating
AAA
AA
A
BBB
BB
YTM (%)
3.03.0
3.13.1
3.53.5
3.93.9
4.34.3
a. Assuming the bonds will be rated AA, what will the price of
the AA-rated bonds...
35. Credit Risk. A bond's credit rating provides a guide to its risk. Suppose that long-term bonds rated Aa currently offer yields to maturity of 7.5%. A-rated bonds sell at yields of 7.8%. Sud- pose that a 10-year bond with a coupon rate of 7.6% is downgraded by Moody's from an Aa to A rating. (L06-5) a. Is the bond likely to sell above or below par value before the downgrade? b. Is the bond likely to sell above or...
just question 35
35. Credit Risk. A bond's credit rating provides a guide to its risk. Suppose that long-term bonds rated Aa currently offer yields to maturity of 7.5%. A-rated bonds sell at yields of 7.8%. Sup. pose that a 10-year bond with a coupon rate of 7.6% is downgraded by Moody's from an Aato A rating. (L06-5) a. Is the bond likely to sell above or below par value before the downgrade? b. Is the bond likely to sell...
10. Bond ratings Aa Aa Rating agencies-such as Standard & Poor's (S&P), Moody's Investor Service, and Fitch Ratings-assign credit ratings to bonds based on both quantitative and qualitative factors. These ratings are considered indicators of the issuer's default risk, which impacts the bond's interest rate and the issuer's cost of debt capital. Based on these ratings, bonds are classified into investment-grade bonds and junk bonds. Which of the following bonds is likely to be classified as a junk bond? OA...
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