Quiz Ch 06 – T/F Linking Bond Ratings and Credit Risk
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
True or false: Bond ratings assess the credit risk associated with a bond.
True or false: Bond ratings assess the credit risk associated with a bond.
True or false: A bond’s current yield would typically be of greater interest to a long-term investor than its yield to maturity.
True or false: Bonds with a Moody’s Ba rating are on par in terms of safety with bonds rated BB by Standard & Poor’s.
True or false: Bonds receiving a Moody’s rating of Ba or lower are commonly labeled as speculative grade, high-yield, or junk bonds.
True or false: The return on premium bonds is overstated by the current yield because investors who purchase a bond at a premium ultimately incur a capital loss during the bond’s term.
True or false: BB or higher ratings from Standard & Poor’s signify investment-grade bonds.
True or false: TIPS differ from most bonds as their cash flows rise in tandem with increases in the national rate of gross domestic product.
True or false: Indexed bonds are called Treasury Interest-Paid Securities or TIPS in the United States.
True or false: Zero-coupon bonds are offered at prices lower than their face value, with investors benefiting from the price difference at maturity.
What term is used to describe the regular interest payments received by the bondholder?