Which one of the following is most likely 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

CCC-rated bonds have a higher risk of default compared to BBB-rated bonds, so issuers offer a higher promised yield to attract investors. Choice A is not necessarily true, as both CCC and BBB bonds can have fixed or variable coupons. Choice B is not necessarily true, as the term of a bond is determined by the issuer and can vary for both CCC and BBB bonds. Choice D is also not necessarily true, as the price of a bond is based on a variety of factors, including the issuer's creditworthiness, interest rates, and market demand.

Which One of the Following Is Most Likely for a CCC-Rated