Quiz Ch 23 – T/F Bond Ratings: Junk Bonds below BBB (Baa)
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: Designated as junk bonds are bonds carrying ratings below BBB (Baa).
True or false: Designated as junk bonds are bonds carrying ratings below BBB (Baa).
True or false: Banks and life insurance companies usually enter investment-grade bonds on their books at their face value.
True or false: Junk bonds are bonds rated BBB (Baa) and above.
True or false: Credit default swaps provide a means for investors to insure corporate bonds.
True or false: Safeguarding a bond, a government guarantee mirrors the value of a put option on the firm’s assets.
True or false: The correlation between bond maturity and the value of a firm’s default right often exhibits a dynamic increase.
True or false: In most cases, promised yields maintain a level at least equal to anticipated yields.
True or false: The value of a risky bond is derived by subtracting the value of a put option on assets from the bond value without default.
True or false: The value of risky bonds is determined by subtracting the call option value from the asset value.
True or false: It’s highly unusual for a corporate bond to exceed a government bond in expected yields.