If Zeus Energy Bonds Are Upgraded from BBB- to BBB

question 88

Multiple Choice

If Zeus Energy bonds are upgraded from BBB- to BBB+, which of the following statements is true?

• A) The current bond price will increase.
• B) Interest rates required on new bond issues will increase.
• C) The current bond price will decrease.
• D) The current bond price will increase and interest rates on new bonds issues will decrease.

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Definitions:

Operating Cash Flow

A measure of the cash generated by a company's normal business operations, reflecting its capacity to sustain and grow operations.

Financial Break-Even

The point at which total revenue exactly covers total costs, leaving no profit or loss.

Financial Basis

The underlying value or cost used for tax purposes, to calculate capital gain or loss upon the sale of an asset, including adjustments for improvements, depreciation, and costs of sale.

Pay Back

The process of returning or repaying borrowed funds, especially the principle amount of a loan.