Bonds with Relatively Low Risk of Default Are Called

question 4

Multiple Choice

Bonds with relatively low risk of default are called

• A) zero coupon bonds.
• B) junk bonds.
• C) investment-grade bonds.
• D) none of the above.

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Definitions:

Investment Project

A project undertaken by an individual or company involving an investment of resources aimed at generating financial returns.

Cost Of Capital

The rate of return that a business must achieve to generate value for its investors, essentially the cost of raising funds through debt or equity.

Dividend Growth Model

A method for determining the value of a stock by using predicted dividends and discounting them back to their present value.

Cost Of Equity

The return that equity investors require on their investment in the firm.