Running head: ASSIGNMENT 2: BOND RATINGSAssignment 2: Bond RatingsAuthors NameInstitutional AffiliationInstructorDate1ASSIGNMENT 2: BOND RATINGS2Assignment 2: Bond RatingsQuestion 1In this case, we must first determine the Effective Annual Rate-EAR for the \$11,000,000since it will be paid within 26 annual installments but with a monthly compounded monthly rate.This is an annuity due case because the first installment is paid at the spot. = 12 (Due to the 12 months in a year of receiving interest) = 9/12 (Compounded monthly interest rate)PV = -100 (for the whole amount of our money) and finally, = (1 + ) = 100(1.0075)12 = 109.3807 = 109.3807 100 = 9.38%The final step is to calculate the present value-PV of the won \$11,000,000.N = 26 (This is the number of expected annual payment)I = 9.38 (EAR)PMT (C) = 11,000,000 / 26 = 423,076.92The expected present value-PV = ( 1 (1 + ) / )= 423,076.92 (1 (1 + .0938)26 / .0938) = \$, , . ASSIGNMENT 2: BOND RATINGS3Question 2Bonds ratings help in calculating the credit rating. This score is helpful to potentialinvestors who are in need of investing in the given firm. Bond ratings are done by various creditrating institutions such as; Fitch Ratings, Standard & Poors (S&P) and Moodys ratin ...

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