Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Question
Chapter 20, Problem 3CQ
Summary Introduction
To explain: The reason for the noninvestment-grade bonds having higher direct costs than investment grade issues.
Bond:
Bond refers to the securities, which are traded in the public to raise the capital when needed. It is an investment with a fixed income, where an investor gives money to an entity or individual for a specified period of time at a fixed rate.
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Why do noninvestment-grade bonds have much higher direct costs than investment-grade issues?
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What are potential problems or limitations of using methods, to estimate the cost of debt, that rely on bond ratings?
Chapter 20 Solutions
Corporate Finance
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Similar questions
- What are the potential problems or limitations of using methods, to estimate the cost of debt, that relies on bond ratings?arrow_forwardWhich of the following is the worst measure of the cost of debt? Estimating Interest Rate based on Synthetic Bond Rating O Estimating Interest Rate based on Actual Bond Rating Current Bank Loan Rate Interest rate of Outstanding Bondsarrow_forwardWhat is the main reason for the yield differences between treasury bond yield and corporate bond yield? a. Credit risk b. Systemic Risk c. Liquidity risk d. Interest rate riskarrow_forward
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