Rating agencies-such as Standard & Poor's Corporation (S&P), Moody's Investor Service, and Fitch Ratings-assign credit stings to bonds based on both quantitative and qualitative factors. These ratings are considered Indicators of the issuer's default risk, which Impacts the bond's interest rate anu the issuer's cost of debt capital. Based on these ratings, bonds are classified into investment-grade bonds and junk bonds. Which of the following bonds is likely to be classified as an Investment-grade bond? A bond whose issuer has a 10% return on capital, a total debt to total capital ratio of 85%, and a 13% yield. A bond whose Issuer has a 30% retum on capital, a total debt to total capital ratio of 15%, and a 6% yield. You heard that rating agencies have upgraded 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 Treasury bond that yields 12.0%, and A $20,000 investment in a 10-year corporate bond with an A rating and a yield of 15.6% Based on this information, what is your estimate of the corporate bond's default risk premium? 3.6% 4.0% 5.0%