5. Referring to WorldCom case, comment on the following statement: Credit rating is very important in determining the yield, but we cannot purely rely on it. You can bring in WorldCom examples to explain a). Why credit rating is important, and widely used in bonds investment; b). Why we cannot purely rely on it, for example, WorldCom may share the same credit rating with other similar firm, but yields can be very different, what are the factors behind?

6. Based on what you conclude from Question 5, estimate the percentage yield (known as the pricing of bond...) that WorldCom will incur on its 3-, 5-, 7-, and 30-year notes, respectively. You need to show clearly about your assumptions, methods, formulation, and calculation in a manner that can be explained to those who are not familiar with credit market and bond pricing. I have provided below the necessary information needed to estimate the percentage yield for your perusal.

Exhibit 8 WorldCom, Inc.: Corporate Bond Issuance Spreads of Corporate Bonds over Comparable Maturity Treasuries for Standard \& Poor's Bond-Rating Categories Compiled from averages of bonds rated by Standard \& Poor's. A basis point is 0.01%, or 0.0001;100 basis points (bp) equal 1.0%. Exhibit 9 WorldCom, Inc.: Corporate Bond Issuance Close Prices on July 31, 1998, of Corporate Bonds Issued by Telecommunications and Media Companies Note: Standard \& Poor's uses + and - to indicate finer distinctions between the rating categocies. Moody's uses the numbers 1,2 , and 3 . An A1 bond is better than an A2 bond, and an A2 bond is better than an A3 bond. Exhibit 6 WorldCom, Inc.: Corporate Bond Issuance Recent Movements in Interest Rates Exhibit 8 WorldCom, Inc.: Corporate Bond Issuance Spreads of Corporate Bonds over Comparable Maturity Treasuries for Standard \& Poor's Bond-Rating Categories Compiled from averages of bonds rated by Standard \& Poor's. A basis point is 0.01%, or 0.0001;100 basis points (bp) equal 1.0%. Exhibit 9 WorldCom, Inc.: Corporate Bond Issuance Close Prices on July 31, 1998, of Corporate Bonds Issued by Telecommunications and Media Companies Note: Standard \& Poor's uses + and - to indicate finer distinctions between the rating categocies. Moody's uses the numbers 1,2 , and 3 . An A1 bond is better than an A2 bond, and an A2 bond is better than an A3 bond. Exhibit 6 WorldCom, Inc.: Corporate Bond Issuance Recent Movements in Interest Rates