Typically, Higher Coverage Ratios Are Preferred, but Too High a Ratio

question 192

True/False

Typically, higher coverage ratios are preferred, but too high a ratio may indicate under-utilization of fixed-payment obligations, which may result in unnecessarily low risk and return.

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Definitions:

Current Interest Rates

The interest rate present at the moment in the financial market, affecting loans and savings.

Market Price

represents the current price at which an asset or service can be bought or sold in a marketplace.

Bond's Yield

The annual return on a bond investment, calculated by dividing the annual interest payments by the bond's current market price.

Market Interest Rates

The prevailing rate at which borrowers and lenders agree to conduct transactions in the financial markets.