Corporate Finance: Instructor\'s Manual Applied Corporate Finance

Aswath Damodaran 324

Spreads over long bond rate for ratings classes: 2003

Rating Typical default spread Market interest rate on debt

AAA 0. 35 % 4. 35 %

AA 0. 50 % 4. 50 %

A+ 0. 70 % 4. 70 %

A 0. 85 % 4. 85 %

A- 1. 00 % 5. 00 %

BBB 1. 50 % 5. 50 %

BB+ 2. 00 % 6. 00 %

BB 2. 50 % 6. 50 %

B+ 3. 25 % 7. 25 %

B 4. 00 % 8. 00 %

B- 6. 00 % 10. 00 %

CCC 8. 00 % 12. 00 %

CC 10. 00 % 14. 00 %

C 12. 00 % 16. 00 %

D 20. 00 % 24. 00 %

Riskless Rate = 4 %

This is the default spread over and above the long term (10 year) treasury bond

rate at the time of this analysis. See http://www.bondsonline.com

for latest spreads. T