Question

Company A and Company B each have a $ 10,000 bond outstanding.

Required:
a. If both companies’ bonds are due in ten years, what factor(s) might make the bond market value the Company A bond at an amount greater than the Company B bond? If so, would Company A have a higher credit rating than Company B? If so, would the market rate of the Company A bond be higher than the market rate of the Company B bond? Explain your answers to this question, referring to the guidance found in SFAC No. 7.
b. If both companies have the same credit rating, what factor(s) might make the bond market value the Company A bond at an amount greater than the Company B bond? Explain.



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  • CreatedDecember 17, 2014
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