The major factor resulting in a decrease in a bond's rating is
A) decrease in marketability.
B) increase in default risk.
C) the call provision.
D) an increase in its coupon rate.

Question

Quizplus · Accepted Answer

An increase in default risk is a major factor resulting in a decrease in a bond's rating. This means that the likelihood of the issuer defaulting on its bond payments has increased, which reduces the bond's creditworthiness and its rating. Decrease in marketability and the call provision may have an impact on the bond's pricing and value, but they are not the major factors resulting in a decrease in its rating. An increase in coupon rate, on the other hand, may make the bond more attractive to investors and increase its demand, which may actually improve its rating.

The Major Factor Resulting in a Decrease in a Bond's