Other things equal, the yield required on A-rated bonds should be ____ the yield required on B-rated bonds whose other characteristics are exactly the same.
A)greater than
B)equal to
C)less than
D)All of the above are possible, depending on the size of the bond offering.

Question

Quizplus · Accepted Answer

A-rated bonds are considered to be more secure and less risky than B-rated bonds, so investors would require a lower yield on A-rated bonds compared to B-rated bonds with the same characteristics. Therefore, the yield on A-rated bonds should be less than the yield on B-rated bonds.

Other Things Equal, the Yield Required on A-Rated Bonds Should