Debt Rating Credit Spread AAA80 bpAA100 bpA120 bpBBB140 bpBB160 bpSelect one:a. 2.0%b. 3.4% c. 2.9%d. 4.9%Question6Which of the following pairs of characteristics of a bond have an inverse relationship with each other?Select one:
Quiz 5.1a. Coupon rate and yieldb. Price and face valuec. Price and yield d. Coupon rate and face valueQuestion7A firm's bonds have a face value of $1000 and are currently priced at $1000. The coupon rate is 7%. What is the cost of debt capital for these bonds? (Hint: As a matter of logic, there is only one possible answer.)Select one:a. 7%b. 8% c. 5%d. 6%Question8Company ABC Ltd is based in Australia. All its operations and all of its shareholders are Australian. Company XYZ plc is based in the United Kingdom and all of its operations and shareholders are in the UK. ABC is considered to be a less risky investment for a potential debt holder. The general level of interest rates in Australia is higher than in the UK. ABC's costof debt capital is 5.0%.All else being equal, which of the following is most likely to be the cost of debt capital for XYZ plc?(Hint: This is a matter of logic, based on the two things that determine the yield on debt - the general level of interest rates in that country, and the riskiness of the debt. If both of these factors indicate that one company's debtis going to be higher (or lower) than another company's debt, we can draw a
Quiz 5.1logical conclusion. If these factors are "pulling in opposite directions", so to speak, we don't know which effect will be stronger without more information.)
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