Bond rating agencies like Moody's and Fitch specialize in:O A. guaranteeing a specific interest rate payment by bond issuers to investorsO B. assessing the liquidity risk of issuers.OC. assessing the credit and default risk of issuers.O D. assessing the credit, default and liquidity risk of issuers.

Moodys and Fitch are the rating agencies that measures the bond issuer's financial position and its…

Bond rating agencies like Moody's and Fitch specialize in: O A. guaranteeing a specific interest rate payment by bond issuers to investor: O B. assessing the liquidity risk of issuers. O C. assessing the credit and default risk of issuers. O D. assessing the credit, default and liquidity risk of issuers.

Bond rating agencies like Moody's and Fitch specialize in: O A. guaranteeing a specific interest rate payment by bond issuers to investor: O B. assessing the liquidity risk of issuers. O C. assessing the credit and default risk of issuers. O D. assessing the credit, default and liquidity risk of issuers.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 12MC

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Rating agencies—such as Standard & Poor’s (S&P) and Moody’s Investor Service—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 an investment-grade bond?A bond with 30% return on capital, total debt to total capital of 15%, and 6% yieldA bond with 10% return on capital, total debt to total capital of 85%, and 13% yieldYou heard that rating agencies have upgraded a bond’s rating. The yield on the bond is likely to , and the bond’s price will .Assume you make the following investments:• A $10,000 investment in a 10-year T-bond that has a yield of 5.00%• A $20,000 investment in a 10-year corporate bond with an AA rating and a yield of 6.50%Based…
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