The better the bond rating, the lower the rate of return demanded in the capital markets.

Name: The better the bond rating, the lower the rate of return demanded in the capital markets.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This statement is true. A higher bond rating indicates that there is a lower risk of default by the issuer, which in turn lowers the perceived risk for investors. As a result, investors are willing to accept a lower rate of return on their investment in bonds with better ratings.

The Better the Bond Rating, the Lower the Rate of Return