Question

In: Finance

36. (0.2 point) An example of an investment grade corporate bond would be one rated (a)...

36. (0.2 point)
An example of an investment grade corporate bond would be one rated

(a) B.

(b) D.

(c) BBB.

(d) BB.

37. (0.2 point)
Among similar corporate bonds, the one with the highest market price would be the one with a rating of

(a) A.

(b) CCC.

(c) B.

(d) BBB.

38. (0.2 point)
The major factor resulting in a decrease in a bond's rating is
(a) decrease in marketability.

(b) increase in default risk.
(c) the call provision.

(d) an increase in its coupon rate.

Expert Solution

36. BBB

BBB is the minimum investment grade rating for an investment grade corporate bond. Hence the bond must be rated at least BBB Or higher to qualify investment grade.

37 A

Higher the rating of a bond higher is the credibility and hence price is relatively more.

38 increase in default risk.

Higher the chances of default by a particular bond the lower the rating that is assigned to it

jeff jeffy answered 2 years ago

Consider two otherwise-comparable bonds. One is a corporate bond of the lowest investment grade, and the...

Consider two otherwise-comparable bonds. One is a corporate bond of the lowest investment grade, and the other is issued by the American government. The difference between their interest rates represents Group of answer choices the liquidity premium the prime rate markup the default risk premium the term spread

Which of the following statement is most FALSE? A. Investment grade bonds are rated BBB or...

Which of the following statement is most FALSE? A. Investment grade bonds are rated BBB or higher by Standard & poor's b. bond markets are primarily OTC transactions c. B/c interest rates tend to fall in response to an economic slow down, an inverted yield curve is often interpreted as a negative forecast for economic growth d. inverted yield curves tend to follow recessions e. the yield curve tends to be sharply increasing as the economy comes out of a...

At the end of July, the average yields on 10 top-rated corporate bonds and 10 intermediate-grade...

At the end of July, the average yields on 10 top-rated corporate bonds and 10 intermediate-grade bonds were 7.65% and 8.42%, respectively. At the end of August, the average yields on 10 top-rated corporate bonds and 10 intermediate-grade bonds were 6% and 6.71%, respectively. The confidence index ________ during August, and bond technical analysts are likely to be ________. (Hint: you have to find the confidence index for July and August separately and compared to of them) increased; bullish increased;...

Alex Smith, is considering an investment in a corporate bond, or a callable corporate bond. He...

Alex Smith, is considering an investment in a corporate bond, or a callable corporate bond. He has asked you to explain each and how they differ. Assume: Par=$1,000, Coupon Rate=4%, Market Rate=3%, Remaining Term=9yrs, Remaining Term to Call=4yrs, typical call premium applies • Provide a write up comparing and contrasting the different bond types • Under the assumption that Joe is very risk averse, make a recommendation, with support

Which one of the following is most likely for a CCC-rated bond, compared to a BBB-rated...

Which one of the following is most likely for a CCC-rated bond, compared to a BBB-rated bond? A) The CCC bond will have a shorter term. B) The CCC bond will have a variable-coupon rate. C) The CCC bond will offer a higher promised yield to maturity. D) The CCC bond will have a higher price for the same term. 2) Periodic receipts of interest by the bondholder are known as: A) principal payments. B) coupon payments. C) the default...

suppose the risk free rate is 1.50%; on average, an AAA rated corporate bond carries a...

suppose the risk free rate is 1.50%; on average, an AAA rated corporate bond carries a credit spread of 0.5%, an BB-rated corporate bond carries a credit spread of 2.5% and a B rated corporate bond carries a credit spread of 3.5%. company BTS's outstanding debt is rated A by rating agencies. What could be the cost of debt for BTS based on prevailing market rates? a. 1.25% b. 5.25% c. 3.25% d. 4.25%

A BBB-rated corporate bond has a yield to maturity of 12.7 %. A U.S. treasury security...

A BBB-rated corporate bond has a yield to maturity of 12.7 %. A U.S. treasury security has a yield to maturity of 10.7 %. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 11.5 % and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the treasury bond? b. What is the price (expressed as a percentage of the face value)...

A BBB-rated corporate bond has a yield to maturity of 9.0 %. A U.S. Treasury security...

A BBB-rated corporate bond has a yield to maturity of 9.0 %. A U.S. Treasury security has a yield to maturity of 7.0 %. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 7.9 % and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face...

A BBB-rated corporate bond has a yield to maturity of 9.1 %. A U.S. treasury security...

A BBB-rated corporate bond has a yield to maturity of 9.1 %. A U.S. treasury security has a yield to maturity of 7.3 %. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 7.5 % and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the treasury bond? b. What is the price (expressed as a percentage of the face value)...

A BBB-rated corporate bond has a yield to maturity of 9.5 %. A U.S. treasury security...

A BBB-rated corporate bond has a yield to maturity of 9.5 %. A U.S. treasury security has a yield to maturity of 7.8 %. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 8.8 % and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the treasury bond? b. What is the price (expressed as a percentage of the face value)...