Chapter 6, Problem 1DC

Summary Introduction

Debt rating:

Corporations borrow money when they are in need of fund and there is a liability to return the same money with interest at the time of maturity. The system to ascertain capability of the corporation to return its debts is called its debt rating.

Yield curve

The yield curve is a curve in the form of the line that plots the rate of interest of those bonds which have different completion period but equal credit quality. For deriving, interest rates yield curve is often used.

Treasury yield curve

Treasury yield curve is such a curve that shows the different rate of interest with changing maturity period. It is a connection between yield and maturity of the treasury securities which provide fixed income during the period.

To determine:

F Company’s current debt rating and treasury yield curve.