Rating agencles-such as Standard 8 Poor's (S\&P) and Moody's investor Service-assign credit ratings 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 and 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 a Junk bond? A bond with a B rating, 11% return on capital, 87% total debt to total capital, and a 26% yield A bond with a B8B rating, 14% return on capital, 42% total debt to total capital, and a 10% 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 investenent in a 10 -year T-bond that has a yield of 11.00% - A $20,000 investment in a 10-year corporate bond with an bes rating and a wleld of 14,304% Bised on this informstion, and the knowiedge that the difference in liquidity risk premiums between the two bonds is 0 .40\%6, what is your estimate of the cogorate bond's defauit risk premium? 4.35%=4.06%3.19%6 2.90%