1. Which of the following statements is most accurate and true regarding bond ratings
A. The rating agencies do not modify the ratings with + or – signs after the letters
B. The ratings assigned are ultimately meant to indicate the type of buyer of the bond
C. Once the rating is assigned to an issue, it cannot be charged for the first two years after which it is reviewed regularly
D. Bonds rated BB+ and below are referred to as high yield or speculative grade
2. Which of the following is the correct expression for the amount of common stock or debt that a company needs to issue after taking into account the flotation costs?
Amount of issue = (Net proceeds + Other flotation costs in dollars) / (1 – Percentage flotation costs)
Amount of issue = (Net proceeds + Other flotation costs in dollars) / (1 + Percentage flotation costs)
Amount of issue = (Net proceeds – Other flotation costs in dollars) / (1 – Percentage flotation costs)
Amount of issue = (Net proceeds – Other flotation costs in dollars) / (1 + Percentage flotation costs)
Amount of issue = (Net proceeds + Other flotation costs in dollars) × (1 – Percentage flotation costs)