Finance

Standard & Poors ratings are grouped into two major categories, invest

Standard & Poors ratings are grouped into two major categories, investment-grade and speculative- grade. Bonds that are rated (i) are included in the investment-grade group, while speculative-grade bonds are those rated (ii) . (i) (ii) a. AAA, AA, A BBB, BB, B, CCC, CC, C b. AAA, AA, A, BBB BB, B, CCC, CC, C […]

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Date: September 19th, 2020

In January, 2002, Jones Company issues a pure-discount bond with a pro

In January, 2002, Jones Company issues a pure-discount bond with a promised payment of X=$1000 that matures in T=5 years. The market price of the bond is P=$777 . The bond is default- risky. Specifically, the probability is 0. 8 that Jones Company will pay the full amount of X at maturity, and is 0.2 […]

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Date: September 19th, 2020

Compute the promised yield to maturity and expected return to maturity

Compute the promised yield to maturity and expected return to maturity on a default-risky 3-year pure-discount corporate bond that has a current price of $543 . With a probability of 0.6, the issuer will repay the principal of $1,000 at maturity. However, the probability is 0.4 that the issuer will default, in which case bondholders […]

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Date: September 19th, 2020