Rating agencies-such as Standard Poor's (S&P), Moody's Investor Service, and Fitch Rating-credit ratings to bonds based on both quantitative factors. These ratings are considered indicators of the issuer's default risk, which impacts the bond's interest rate and issuer's cost 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 with 30% return on capital, total debt to total capital of 15%, and 6% yield A bond with 10% return on capital, total debt to total capital of 85%, and 13% yield You heard that rating agencies have upgraded a bond's rating. The yields 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-years T-bond that has a yield of 11.0% A $20,000 investment in a 10-years corporate bond with an AA rating and a yield of 14.3% Based on this information, what is your estimate of the corporate bond's default risk premium? 5.0% 3.3% 3.6% 4.6%