All categories

3 years ago

(a) how are bonds rated? (b) how are these rating helpful to the investors?

Business

1 answer:

Jet001 [13]3 years ago

7 0

Answer:

a) Bond rating is done by evaluating and considering all the relevant internal as well as external factors associated with the financial status of a business.

b) Bond rating helps in analysing the risk associated with the bond by analyzing its credit quality and thus helps investors taking decisions related to their investments.

Explanation:

a) Bond-rating is the letter grading system that is used to indicate the quality of the credit-related to the bond of various organizations. Bond-rating is done by evaluating and considering all the relevant internal as well as external factors associated with the financial status of a business. Internal factors may include the financial strength of the organization. External factors may include various networks with interested investors and other government organizations and policies related to the same.

There are three important agencies that analyze the credit quality of a bond. These agencies are Standard & Poor's, Moody's, and Fitch rating Inc.

b) Bond-rating help in analyzing the risk associated with the bond by analyzing its credit quality and thus helps investors taking decisions related to their investments. It helps the investors to study the stability and quality of a bond. Hence, higher-rated bonds are considered to be more stable and appropriate for investment purposes.

You might be interested in

Let $S$ be the set of complex numbers of the form $a + bi,$ where $a$ and $b$ are integers. We say that $z \in S$ is a unit if t

lakkis [162]

Answer:

Number of units possible in S are 4.

Explanation:

Given S is a set of complex number of the form $a+bi$ where a and b are integers.

$z\in S$ is a unit if $w\in z$ exists such that $zw=1$ .

To find:

Number of units possible = ?

Solution:

Given that:

$zw = 1$

Taking modulus both sides:

$|zw| = |1|$

Using the property that modulus of product of two complex numbers is equal to their individual modulus multiplied.

i.e.

$|z_1z_2|=|z_1|.|z_2|$

So,

$|zw| = |1|\\\Rightarrow |zw| =|z|.|w| =1\\\Rightarrow |z|=\dfrac{1}{|w|}$ ......... (1)

Let $z=a+bi$

Then modulus of z is $|z| = \sqrt{a^2+b^2}$

Given that a and b are integers, so the equation (1) can be true only when $|z| = |w| =1$ (Reciprocal of 1 is 1). Modulus can be equal only when one of the following is satisfied:

(a = 1, b = 0) , (a = -1, b = 0), (a = 0, b = 1) OR (a = 0, b = -1)

So, the possible complex numbers can be:

$1.\ 1 + 0i = 1\\2.\ -1 + 0i = -1\\3.\ 0+ 1i = i\\4.\ 0 -1i = -i$

Hence, number of units possible in S are 4.

6 0

3 years ago

Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require the payment of a call premium of $10,000. The bond

ivann1987 [24]

Answer:

Explanation:

The journal entry is shown below:

On September 30

Bonds payable A/c Dr $1,000,000

Loss on bond retirement A/c Dr $20,000

To Discount on Bond A/c $10,000

To Cash A/c $1,010,000

(Being the callable bond is recorded)

The computation is shown below:

For cash

= Par value of bond + Premium

= $1,000,000 + $10,000

= $1,010,000

For Loss, it would be

= $1,010,000 - $990,000

= $20,000

And, the remaining amount would be transferred to discount on bond

7 0

3 years ago

Webster is a talented baker and has a degree in business management. He wants to own his own chain of incorporated bakeries one

Ludmilka [50]

Answer: High up-front costs.

Explanation:

Webster's limitation to owning a chain of incorporated bakeries would be the high up-front cost or capital needed to start up the company.

The up-front costs as in the case of the question is the money needed to start up the bakery company.

3 0

3 years ago

Suppose People's bank offers to lend you $10,000 for 1 year on a loan contract that calls for you to make interest payments of $

vodka [1.7K]

Answer:

10.38%

Explanation:

The formula to compute the effective annual rate of the loan is shown below:

= (1 + nominal interest rate ÷ periods)^ number of period - 1

The nominal interest rate is shown below:

= $250 × 4 ÷ $10,000

= $1,000 ÷ $10,000

= 0.1

Now the effective annual rate is

= (1 + 0.1 ÷ 4)^4 - 1

= (1 + 0.025)^4 - 1

= 1.025^4 - 1

= 10.38%

Since the interest rate is measured on a quarterly basis, we know there are four quarters in a year and we do the same in the calculation part.

This is the answer but the same is not provided in the given options

4 0

3 years ago

A firm expects to sell 25,500 units of its product at $16 per unit. pretax income is predicted to be $60,500. if the variable co

aksik [14]

A firm expects to sell 25,500 units of its product at $16 per unit. pretax income is predicted to be $60,500. If variable costs are $8 per unit, total fixed costs must be $143,500.

Fixed costs are costs that stay constant no matter changes in production volume, implying that irrespective of whether output rises or decreases, total fixed costs remain constant within the relevant range.

Rent, labor, depreciation, insurance, and other fixed costs per unit fluctuate over the relevant range, on the contrary.

Given,

Selling price = $16

Variable cost per unit = $8

Units sold = 25,500

Pretax income = $60,500

$Contribution Margin = (Selling Price Per Unit - Variable Cost Per Unit) * Units Sold$