The Bond Rating of a Security Reflects The

question 50

Multiple Choice

The bond rating of a security reflects the:

• A) size of the coupon payment relative to the face value.
• B) likelihood the lender/borrower will be repaid by the borrower/issuer.
• C) return a holder is likely to receive.
• D) size of the coupon rate relative to other interest rates.

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Definitions:

Current Tax Liabilities

Taxes owed to the government within the current fiscal year.

Temporary Difference

Refers to the differences that arise between the tax base of an asset or liability and its carrying amount in the financial statements, which will result in taxable or deductible amounts in future years.

Interest On Municipal Bonds

The periodic payments made to investors of municipal bonds, often exempt from federal and sometimes state and local taxes.

MACRS Depreciation

Modified Accelerated Cost Recovery System, a method of depreciation for tax purposes in the United States that allows a faster write-off of assets.