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Unformatted text preview: ( 1000 ) 1 ( 35 950 20 1 r r T t t + + + = = r = 3.8635% 10 yr Maturity Coupon Rate = 7% Price = $950 Solve for r = semiannual rate Yield to Maturity Example Bond Equivalent Yield 7.72% = 3.86% x 2 Effective Annual Yield (1.0386) 2 1 = 7.88% Current Yield Annual Interest / Market Price $70 / $950 = 7.37 % Yield Measures Rating companies Moodys Investor Service Standard & Poors Fitch Rating Categories Investment grade Speculative grade Default Risk and Ratings Coverage ratios Leverage ratios Liquidity ratios Profitability ratios Cash flow to debt Factors Used by Rating Companies Sinking funds Subordination of future debt Dividend restrictions Collateral Protection Against Default...
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 Spring '09
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