Which of the Following Is Not True About Junk Bonds

question 12

Multiple Choice

Which of the following is not true about junk bonds?

• A) Junk bonds are either unrated or rated below investment grade by the credit rating agencies
• B) Typically yield about 1-2 percentage points below yields on U.S. Treasury debt of comparable maturities.
• C) Junk bonds are commonly used source of "permanent" financing in LBO transactions
• D) During recessions, junk bond default rates often exceed 10%
• E) Junk bond default risk on non-investment grade bonds tends to increase the longer the elapsed time since the original issue date of the bonds

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