The Credit Rating Assigned to a Bond Reflects the Probability

question 116

Multiple Choice

The credit rating assigned to a bond reflects the probability that:

• A)the bond's face value will increase above its market value.
• B)the bond will go into default.
• C)the company will earn extremely high returns on its bond's sinking fund investments.
• D)the bond's maturity value will become lower than its principal value.
• E)the firm will exercise a call provision on the bond.

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Definitions:

Commencement

The act or moment when something begins or is initiated.

Bankruptcy Proceeding

A court procedure that allows people or entities that cannot pay their debts to get partial or total debt relief.

Discharged

The status of a debt having been paid or otherwise settled, or the termination of a legal duty or obligation.

Chapter 13

A part of U.S. bankruptcy law that allows individuals to undergo a financial reorganization supervised by the court.