Burger King is likely to trade at a higher nominal spread YUM Brands (KFC) is li

Question

Burger King is likely to trade at a higher nominal spread

YUM Brands (KFC) is likely to trade at a higher price

Burger King is likely to trade at a higher price and YUM Brands is likely to trade at a higher nominal spread

Event risk is a special event that impacts the collection of invested capital. For example, assume that YUM Brands agrees to acquire Burger King and YUM will pay for the transaction by using its existing cash balances and by assuming the Burger King debt. Assume that the both rating agencies put both bonds on the Watch List, Burger King for a possible upgrade and YUM Brands for a possible downgrade. Which statement best describes the most likely implications of this transaction for these bonds. CIRCLE THE BEST DESCRIPTION OF THE LIKELY IMPLICATIONS Issuer Tickers Coupon Maturity Ratings Duration Price Yield Benchmark Benchmark Yield Nomimal Spread Burger King BK 4% Senior Notes due 6/30/2024 B3/B- 8 85 4.71% 10yr UST 3.00%                     171 YUM Brands YUM 1% Senior Notes due 1/31/2034 Baa2/BBB 18 77 5.09% 30yr UST 4.00%                     109

Explanation / Answer

The implication that describes the best is :

Burger King is likely to trade at a higher nominal spread

A.)

Burger King is likely to trade at a higher nominal spread

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