Home / Questions / Consider the following information regarding corporate bonds: Rating AAA AA A BBB BB
Consider the following information regarding corporate bonds:
|
Rating |
AAA |
AA |
A |
BBB |
BB |
B |
CCC |
|
Average Default Rate |
0.0% |
0.0% |
0,2% |
0,4% |
2.1% |
5.2% |
9.9% |
|
Recession Default Rate |
0.0% |
1.0% |
3.0% |
3.0% |
8.0% |
16.0% |
43.0% |
|
Average Beta |
0.05 |
0.05 |
0.05 |
0.10 |
0.17 |
0.26 |
0.31 |
|
Company |
Market Capitalisation ($mm) |
Total Enterprise Value ($mm) |
Equity Beta |
Debt Rating |
|
Taggart Transcontinental |
$4,500 |
8,000 |
1.1 |
BBB |
|
Rearden Metal |
$3,800 |
7,200 |
1.3 |
AAA |
|
Wyatt Oil |
$2,400 |
3,800 |
0.9 |
A |
|
Nielson Motors |
$1,500 |
4,400 |
1.75 |
BB |
Your estimate of the asset beta for Nielson Motors is closest to:
a.) 0.59
b.) 0.71
c.) 0.66
d.) 0.42
Dec 03 2019 View more View Less
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