Author Question: As the rating of a bond increases (for example, from A, to AA, to AAA), it generally means that ... (Read 65 times)

big1devin · **on:** Jul 10, 2018

As the rating of a bond increases (for example, from A, to AA, to AAA), it generally means that

A) the credit rating increases, the default risk increases, and the required rate of return decreases.
B) the credit rating increases, the default risk decreases, and the required rate of return increases.
C) the credit rating increases, the default risk decreases, and the required rate of return decreases.
D) the credit rating decreases, the default risk decreases, and the required rate of return decreases.

Question 2

From 1980 to 2013, the default risk premium differential between Aaa-rated bonds and Baa-rated bonds has averaged between ________.

A) 5 to 15 basis points
B) 20 to 50 basis points
C) 100 to 200 basis points
D) 250 to 350 basis points