Investors Who Own Bonds Having Lower Credit Ratings Should Expect

question 69

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:

One-tailed Test

A statistical test that determines the direction of a relationship or difference, testing for either a positive or negative effect only.

Directional Research Hypothesis

A hypothesis that specifies the direction of the expected difference or relationship between the variables being studied.

Research Hypothesis

A statement predicting the relationship between variables, formulated to be tested by research.

Null

Typically refers to the null hypothesis in statistical analysis, which posits that there is no significant difference or relationship between specified populations, any observed difference being due to sampling or experimental error.