A bond that is generally agreed to have higher default risk will experience all of the following EXCEPT
A) declining demand.
B) declining supply.
C) higher yield.
D) lower price.

Question

Quizplus · Accepted Answer

If a bond is generally agreed to have higher default risk, investors will demand a higher yield to compensate for the increased risk. As a result, the bond's price will decrease (D), and there may be declining demand (A) as investors shy away from the riskier investment. However, there may not necessarily be declining supply (B), as the issuer may still attempt to raise funds using this bond despite the increased risk.

A Bond That Is Generally Agreed to Have Higher Default