To earn a high rating from the bond rating agencies, a company would want to have: (check all that apply) A high profitability ratio A high quick ratio A low EBIT to interest coverage ratio A high debt-to-equity ratip
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- To earn a high rating from the bond rating agencies, a company would want to have: (check all that apply)
A high profitability ratio
A high quick ratio
A low EBIT to interest coverage ratio
A high debt-to-equity ratip
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Solved in 3 steps
- o earn a high rating from the bond rating agencies, a company would want to have: (check all that apply) A high quick ratio A high profitability ratio A low debt-to-equity ratio A low EBIT to interest coverage ratioWith bond valuation, there are many terms to understand specific to bonds. Take one of these terms e.g. coupon rate or effective annual yield (EAY) and explain what it is and give an example or explain its significance to the financial manager.Using the previous information, correctly match each curve on the graph to it's corresponding issuing company. (Hint: Each curve indicates the path that each bond's price, or value, is expected to follow.) Curve A Curve B Curve C Based on the preceding information, which of the following statements are true? Check all that apply. O Johnson Incorporated's bonds have the highest expected total return. O The bonds have the same expected total return. O The expected capital gains yield for Smith, LLC's bonds is negative. O The expected capital gains yield for Smith, LLC's bonds is greater than 12%. Irwin Corporation's bonds have exhibited a substantial trading volume in the past few years. Its bonds would be referred to as a
- Bond rating agencies like Moody's and Fitch specialize in: O A. guaranteeing a specific interest rate payment by bond issuers to investors O 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.Which of the following statements is CORRECT? Group of answer choices The bond-yield-plus-risk-premium approach to estimating the cost of common equity involves adding a risk premium to the interest rate on the company’s own long-term bonds. The size of the risk premium for bonds with different ratings is published daily in The Wall Street Journal or is available online. The WACC is calculated using a before-tax cost for debt that is equal to the interest rate that must be paid on new debt, along with the after-tax costs for common stock and for preferred stock if it is used. An increase in the risk-free rate is likely to reduce the marginal costs of both debt and equity. The relevant WACC can change depending on the amount of funds a firm raises during a given year. Moreover, the WACC at each level of funds raised is a weighted average of the marginal costs of each capital component, with the weights based on the firm’s target capital structure. Beta measures market risk,…Bond ratings are positively related to Select one: a. type of business. b. earnings instability. C. size. d. leverage.
- Describe the likely effect on the yield to maturity of a bond resulting from:a. An increase in the issuing firm’s times-interest-earned ratio.b. An increase in the issuing firm’s debt-to-equity ratio.c. An increase in the issuing firm’s quick ratio.From page 9-2 of the VLN, what is the first thing you want to identify when approaching a bond problem? Group of answer choices A. Annual bond or semiannual bond B. Whether the market rate is different from the stated rate. C. The cash flows provided by the bond. D. The company's debt to equity ratio.la bonitob at bloky enig (7.8) The interest rate investors expect on a new bond issue can be determined by computing the for the company's Alternatively, it is possible on newly to determine the cost of new debt financing by finding the issued bond with similar (7.9) The firm's overall measure of the cost of capital is the cost of debt is the The dollar cost of equity is overall firm average cost of capital is the cost of equity plus the cost of debt, divided by The dollar (7.10) Interest (is / is not) a tax-deductible expense, and dividends paid to stockholders (are / are not). The payment of interest reduces the firm's taxes by after-tax cost of debt in dollars equals The after-tax cost of debt in percentage terms is WACC = dito The The
- Risks of investing in bonds The higher the risk of a security, the higher its expected return will be. A bond’s risk level is reflected in its yield, but understanding the different risks involved when investing in bonds is important. Q1. The following graph shows the relationship between interest rates and maturity for three security classes: US Treasury securities (USTs), AA-rated corporate bonds, and BBB-rated corporate bonds. Use the selection dropdown lists to correctly associate each curve with its corresponding security class: Select one of the three options for A, B, and C Option A: BBB or UST or AA Option B: AA or BBB or UST Option C: AA or UST or BBB Frank Barlowe is retiring soon, so he’s concerned about his investments providing him with a steady income every year. He’s aware that if interest rates Q2._____, the potential earnings power of the cash flow from his investments will increase. In particular, he is concerned that a decline in interest rates might lead to…4) I need help with finance homework questions asap, Multiple choice question. Bond ratings measure a company's: Exchange rate risk. Equity risk. Interest rate risk. Operating risk. Default risk.You review the characteristics of a recent corporate bond issue and notice that the issuing firm's Debt to Equity (D/E) ratio is higher than the industry average, while its Return on Equity (ROE) is lower than the industry average. If bonds issued by other firms with industry average D/E and ROE ratios have a BBB rating, you can draw the following conclusion: a. This bond is likely to have a higher rating (A or above). b. This bond is likely to have a lower rating (BB or below). c. This bond will also have a BBB rating.
