For the Major Bond-Rating Agencies, the Lowest Level of an Investment

question 53

Multiple Choice

For the major bond-rating agencies, the lowest level of an investment grade bond is:

• A)AA (investment grade includes AAA and AA).
• B)A (investment grade includes AAA, AA and A).
• C)BBB (investment grade includes AAA, AA, A, and BBB).
• D)B (investment grade includes AAA, AA, A, BBB, BB and B).

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Definitions:

Call Premiums

The amount by which the price of a callable bond or preferred stock exceeds its par value or redemption price, often stipulated as a penalty for early redemption by the issuer.

Coupon Rates

Interest rates specified on bonds or other fixed-income securities that issuers promise to pay bondholders annually, expressed as a percentage of face value.

Convertible Bonds

Bonds that can be converted into a predetermined amount of the company's equity at certain times during their life, usually at the discretion of the bondholder.

Yield To Maturity

The total return anticipated on a bond if it is held until its maturity date, accounting for interest payments and the capital gain or loss.