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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%
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 Rearden Metal is closest to:
0.66 | ||
0.59 | ||
0.71 | ||
0.42 |
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