Which of the Following Bonds Would Have the Highest Default

question 109

Multiple Choice

Which of the following bonds would have the highest default risk?

• A) Municipal bonds
• B) Investment-grade bonds
• C) U.S. Treasury bonds
• D) Junk bonds

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Definitions:

Installment Loan

A loan that is repaid over time with a set number of scheduled payments.

Stated Annual Rate

The interest rate of a financial product, such as a loan or savings account, as advertised before the effects of compounding and fees.

Cost

The value or price paid to acquire, produce, or maintain a good or service.

Time Value

The time value of money concept suggests that money available now is more valuable than the same amount in the future due to its potential earning capacity.