Which One of the Following Is Most Likely for a CCC-Rated

question 93

Multiple Choice

Which one of the following is most likely for a CCC-rated bond,compared to a BBB-rated bond?

• A) The CCC bond will have a variable-coupon rate.
• B) The CCC bond will have a shorter term.
• C) The CCC bond will offer a higher promised yield to maturity.
• D) The CCC bond will have a higher price for the same term.

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Definitions:

Capital Lease

A lease agreement in which the lessee essentially buys an asset and borrows the funds through the lease, recording the asset and the liability on their balance sheet.

Implicit Interest Rate

An interest rate inferred from leasing transactions or other contractual arrangements, calculated based on the present value of payments and the initial value of the leased asset.

Present Value Factors

A mathematical formula used to determine the present value of a series of future cash flows by applying a specific discount rate.

Capital Lease

A lease classified as a purchase by the lessee for accounting purposes, where the lessee essentially buys the leased asset.