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Introduction to Corporate Finance Task Name: Phase 3 Discussion Board (Essay Sample)
Generating the appropriate interest rate for annuities, perpetuities and bonds can be quite challenging. Using the following website: http://www(dot)bondsonline(dot)com/Todays_Market/Corporate_Bond_Spreads.php put together a table of interest rates for a company with a AAA rating, BB rating and a junk rating. * Discuss which interest rates should be used for an asset which is 1 year in length, 5 years in length, 15 years in length and 30 years in length. * Discuss how the interest rate will be impacted if the bond is a government bond or a corporate bond. * What typically happens to the interest rate as the amount of time increases, i.e. the maturity increases? o Explain your answer. * Why are the interest rates different for different credit ratings? o Explain your answer. source..
Running Head: INTRODUCTION TO CORPORATE FINANCE Introduction to Corporate Finance Name: University: Course: Tutor: Date: Rating B3/B- and will be the most effective for Baa1/BBB+ ratings will be the most effective for an asset which is one year and five years in length respectively. This is because it will be a safer way to earn return for their money. A3/A- rating will be effective for a 15 year asset as well as Aaa/AAA for a 30 year asset (Bonds online, 2011). This is because one is likely to get security over the aligned shares. It is also possible to predict the rising interest rates. The Interest Rates Impact of the interest rate Government bond: Incase the bond is a government bond, and then there is a high probability of comparative safety of the investment. The interest rates in government bond are always paid on time without failure. Furthermore, it is most likely going to increase the amount of capital. Consequently, government bonds are affected by other types of risks like the inflation risk and the interest rate risk (Nielsen, 2011). Interest rates that are issued after the issuance of a government bond, the value of the security being issued is predicted to fall due to the fact that bonds paying higher rat...
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