If the earnings of Corporation A are more viable than the earnings of Corporation B, the required yield on Corporation A's bonds will be higher than the required yield on Corporation B's bonds.

Question

Quizplus · Accepted Answer

The required yield on a bond is inversely related to the creditworthiness of the issuer. Since Corporation A's earnings are more viable than Corporation B's earnings, Corporation A is considered to be a less risky investment. As a result, the required yield on Corporation A's bonds will be lower than the required yield on Corporation B's bonds.

If the Earnings of Corporation a Are More Viable Than