Which of the following bonds has the greatest default risk?
A)A U.S Treasury bond with a two-year maturity
B)An AAA corporate bond with a seven-year maturity
C)A BBB corporate bond with a three-year maturity
D)A CCC corporate bond with a 10-year maturity
E)An AAA corporate bond with a 10-year maturity

Question

Quizplus · Accepted Answer

A CCC corporate bond with a 10-year maturity has the greatest default risk as it has the lowest credit rating and the longest maturity period among the given options. The credit rating indicates a high probability of default or non-payment of interest and principal, and the longer maturity increases the uncertainty and risk of default.

Which of the Following Bonds Has the Greatest Default Risk