Bond ratings Aa Aa g agencies-such as Standard & Poor's (S&P), Moody's Investor Service, and Fitch Ratings-assign credit rating nds based on both quantitative and qualitative factors. These ratings are considered indicators of the issuer's ult risk, which impacts the bond's interest rate and the issuer's cost of debt capital. ed on these ratings, bonds are classified into investment-grade bonds and junk bonds. Which of the following nds is likely to be classified as a junk bond? o A bond with a B rating, an 11% return on capital, a 87 total debt to total capital, and a 26% yield. Q A bond with a BBB rating, a 14% return on capital a 42% total debt to total capital, and a 10% yield. ou heard that rating agencies have downgraded a bond's rating. The yield on the bond is likely to and the bond's price will Assume you make the following investments: A $10.000 investment in a 10-year T-bond that yields 11.5%, and o investment in a 10-year corporate bond with an BBe rating and a yield of 15.0% A Based on this formation, what is vour estimate of the corporate bond s default risk premium