Alpha Geek

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Category > Business & Finance Posted 28 May 2017 My Price 5.00

Consider the following information regarding corporate bonds

 

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

 
 

Answers

Alpha Geek
(8)
Status NEW Posted 28 May 2017 11:05 AM My Price 5.00

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Attachments

file 1495969892-Answer.docx preview (112 words )
C-----------ons-----------ide-----------r t-----------he -----------fol-----------low-----------ing----------- in-----------for-----------mat-----------ion----------- re-----------gar-----------din-----------g c-----------orp-----------ora-----------te -----------bon-----------ds:----------- R-----------ati-----------ng -----------AAA----------- AA----------- A -----------BBB----------- BB----------- B -----------CCC----------- A-----------ver-----------age----------- De-----------fau-----------lt -----------Rat-----------e 0-----------.0%----------- 0.-----------0% -----------0,2-----------% 0-----------,4%----------- 2.-----------1% -----------5.2-----------% 9-----------.9%----------- R-----------ece-----------ssi-----------on -----------Def-----------aul-----------t R-----------ate----------- 0.-----------0% -----------1.0-----------% 3-----------.0%----------- 3.-----------0% -----------8.0-----------% 1-----------6.0-----------% 4-----------3.0-----------% -----------Ave-----------rag-----------e B-----------eta----------- 0.-----------05 -----------0.0-----------5 0-----------.05----------- 0.-----------10 -----------0.1-----------7 0-----------.26----------- 0.-----------31 ----------- Co-----------mpa-----------ny -----------Mar-----------ket----------- Ca-----------pit-----------ali-----------sat-----------ion----------- ($-----------mm)----------- To-----------tal----------- En-----------ter-----------pri-----------se -----------Val-----------ue -----------($m-----------m) -----------Equ-----------ity----------- Be-----------ta -----------Deb-----------t R-----------ati-----------ng ----------- Ta-----------gga-----------rt -----------Tra-----------nsc-----------ont-----------ine-----------nta-----------l $-----------4,5-----------00 -----------8,0-----------00 -----------1.1----------- BB-----------B -----------Rea-----------rde-----------n M-----------eta-----------l $-----------3,8-----------00 -----------7,2-----------00 -----------1.3----------- AA-----------A
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