Which of the following statements is FALSE?
A)Bond ratings encourage widespread investor participation and relatively liquid markets.
B)Bonds in the top four categories are often referred to as investment grade bonds.
C)A bond's rating depends on the risk of bankruptcy as well as the bondholder's ability to lay claim to the firm's assets in the event of a bankruptcy.
D)Debt issues with a low-priority claim in bankruptcy will have a better rating than issues from the same company that have a higher priority in bankruptcy.

Question

Quizplus · Accepted Answer

This statement is false because debt issues with a low-priority claim in bankruptcy will have a worse rating than issues from the same company that have a higher priority in bankruptcy. This is because the lower priority means that in the event of bankruptcy, these debt issues are less likely to be repaid.

Which of the Following Statements Is FALSE