1. Which one of the following statements concerning bond ratings is correct?
A) Investment grade bonds include only those bonds receiving an A or higher rating.
B) A "fallen angel" is a bond that fell from an A rating or above to a BBB rating.
C) Bond ratings only assess the possibility of default.
D) Moody's is the sole provider of bond ratings.
E) Bond ratings consider the potential price volatility of a bond.
2. The common stock of Contemporary Interiors has a beta of 1.13 and a standard deviation of 21.4 percent. The market rate of return is 12.7 percent and the risk-free rate is 4.1 percent. What is the cost of equity for this firm?
11.76 percent
14.40 percent
12.08 percent
13.05 percent
13.82 percent