Investors Who Own Bonds Having Lower Credit Ratings Should Expect

question 85

Multiple Choice

Investors who own bonds having lower credit ratings should expect:

• A)Lower yields to maturity
• B)Higher default possibilities
• C)Lower coupon payments
• D)Higher present value of cash flows

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Definitions:

Extraneous Solutions

Extraneous solutions are solutions that arise in the process of solving an equation but do not satisfy the original equation.

Equation

An affirmation in mathematics that posits the equality of two different expressions.

Directly

Directly refers to a manner of action or occurrence that happens without any intervening factors or steps.

Square

A mathematical operation involving multiplying a number by itself, or a geometric figure with four equal sides and four right angles.