Which One of the Following Is Not True

question 69

Multiple Choice

Which one of the following is not true?

• A)Inflation does not affect the interest rates of bonds.
• B)A bond issuer's rating is affected by its default risk.
• C)An investor holding the bond until maturity expects to receive its par value.
• D)Rating agencies use financial statements to assess the default probability of firms.

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Definitions:

Financially Distressed

A condition where a company or individual cannot generate sufficient revenue to meet its financial obligations, potentially leading to bankruptcy.

Operating Concern

A business enterprise that is functioning and not in the process of liquidation.

Liquidation

The process of winding up a company's affairs by selling off its assets to pay creditors and distribute any remaining assets to shareholders.

Pre-Tax Cost

Expenses or costs that are considered before taxes are applied.