Why might a firm want to maintain a high bond rating? What has been happening to bond ratings in recent years?
Answer to relevant QuestionsWhy might an investor find a zero-coupon bond an attractive investment? How do you think credit spreads behave over the course of the economic cycle? Explain how a capital loss on the sale of a firm’s stock can affect an investor’s taxes. Under what economic forecast would you believe an auto manufacturer would be a good investment? A computer manufacturer? Assume a $1,000 face value bond has a coupon rate of 8.5 percent paid semiannually and has an eight-year life. If investors are willing to accept a 10 percent rate of return on bonds of similar quality, what is the present ...
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