Explain if there is an increase in the operating margin, how would this impact the bond’s...

Explain if there is an increase in the operating margin, how would this impact the bond’s rating and yield to maturity?

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Expert Solution

If there is any increase in the profitability (operating margin) this will improve the coverage ratios of the company. This improvement results in better creditworthiness of the company. This helps in getting better credit ratings for the bonds. As company gets a better rating, the risk of holding the bonds will decrease resulting in the fall of the yield to maturity. This means low risk results in lower returns.

jeff jeffy answered 2 years ago

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