4. Question 4 (credit rating agencies). This question is related to lecture 19. Suppose credit rating is the only thing that determines companies' debt interest rate. Below is the interest rate associated with each credit rating. Credit rating Interest rate AAA 3% AA 3.5% A 4.5% BBB 5.5% BB 7.5% feature. 5 Expected payoff simply means the payoff on average. You need to take into account the probabil- ities of different scenarios. Consider a company that is issuing a ten-year fixed-rate bond with principal value $1 billion today. Throughout this question, ignore the time value of money (i.e., a dollar in the future is worth the same as a dollar today). (a) Suppose the company currently has a credit rating of AA. How much interest expense in dollar terms) can it save in total over the next ten years if its credit rating become AAA? (b) Suppose the company currently has a credit rating of BBB. How much addi- tional interest expense (in dollar terms) does it incur over the next ten years if its credit rating drops to BB? (c) Suppose the company currently has a rating of BB. The company's manage ment simply wants to maximize firm value (with no concern about morality), and suppose they is considering to spend up to $X dollars to bribe the credit rating agency to make the credit rating BBB. Assume that bribing always works and will never be caught. How much, at most, is the company manage- ment willing to spend