Generally with Bond Ratings,the Higher the Rating,the ________ the Interest

question 14

Multiple Choice

Generally with bond ratings,the higher the rating,the ________ the interest rate an investor will receive and the ________ the the risk that the issuer of the bond will default.

• A) higher; higher
• B) higher; lower
• C) lower; higher
• D) lower; lower

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Definitions:

Periodic Rate

The interest rate for a specific period, often rephrased as the interest rate applicable over regular intervals such as monthly or quarterly.

Effective Interest Rate

The real rate of interest earned or paid on an investment or loan, taking into account the effect of compounding.

Finance Charge

A fee representing the cost of credit, or the cost of borrowing, including interest and other charges.

Annual Effective Rate

The annual rate that reflects the compounding of interest, offering a true reflection of the financial product's profitability.