Which of the following might be expected to be the best value-relevant attribute in determining the yield-to-maturity on a firm's bond?

Question

Quizplus · Accepted Answer

The bond rating is the best value-relevant attribute in determining the yield-to-maturity on a firm's bond as it reflects the creditworthiness of the issuer and the likelihood of default on the bond. The book value of the firm's assets and equity may not accurately reflect the financial health of the firm and earnings per share are more relevant for equity investors rather than bondholders. The bond rating is the best value-relevant attribute in determining the yield-to-maturity on a firm's bond because it reflects the creditworthiness of the issuer and the likelihood of default. The higher the bond rating, the lower the perceived risk of default and the lower the yield required by investors. A and B are related to the firm's balance sheet, but do not provide information on the firm's ability to repay the bond. D is related to equity, not debt.

Which of the Following Might Be Expected to Be the Best