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Based on these ratings, bonds are dassified into investment-grade bonds and junk bonds. Which of...

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Accounting

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Based on these ratings, bonds are dassified into investment-grade bonds and junk bonds. Which of the following bonds is likely to be das junk bond? A bond with a BBB rating, a 14% return on capital, a 42% total debt to total capital, and a 10% yieid. A bond with a B rating, an 11% return on capital, a 87% total debt to total capital, and a 26% vield. You heard that rating agencies have uporaded a bond's rating. The yield on the bond is likely to , and the bond's price will Assume you make the following investments: - A $10,000 investment in a 10 -year T-bond that yields 7.50%, and - A $20,000 investment in a 10 -year corporate bond with an Baa ratine and a yield of 10,8046 Based on this information, and the knowledge that the difference in liquidity risk premiums between the two bonds is 0.60%, what is your estimate of the corporate bond's default risk premium? 3.78% 2.70% 3.30% 4.59%

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