Which one of the following is most apt to be correct for a CCC-rated bond, compared to a BBB-rated bond?
A) The CCC bond will have a variable-coupon rate.
B) The CCC bond will have a shorter term.
C) The CCC bond will offer a higher promised yield to maturity.
D)The CCC bond will have a higher price for the same term.

Question

Quizplus · Accepted Answer

A CCC-rated bond is considered highly speculative and carries a higher risk of default than a BBB-rated bond. To compensate for this higher risk, the CCC bond will typically offer a higher promised yield to maturity. Therefore, choice C is the most apt to be correct. Choice A is not necessarily true, as the coupon rate can be fixed or variable for both CCC and BBB bonds. Choice B is not accurate, as the term could be shorter or longer for both bonds, depending on the issuer's needs. Choice D is incorrect as a CCC bond will typically have a lower price for the same term due to its higher risk.

Which One of the Following Is Most Apt to Be