Bond ratings are based on the probability of default risk, which is the risk that O the bond's interest rates may change unexpectedly O the bond's maturity may change O inflation may increase in the short term O the bond's issuer may not be able to make all the required payments
Added by Larry L.
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Step 1: Default risk is the risk that the issuer of a bond will not be able to make the required payments. Show more…
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Madhur L.
We would expect the interest rate on Bond A to be lower than the interest rate on Bond B if the two bonds have identical characteristics except that a. the credit risk associated with Bond A is higher than the credit risk associated with Bond B. b. Bond A was issued by the state of New York and Bond B was issued by the Exxon Mobil Corporation. c. Bond A has a term of 20 years and Bond B has a term of 2 years. d. All of the above are correct.
James K.
Mauya M.
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