Altman's study of bond mortality found
A) most defaults occur within 2 years of issuance.
B) in general, the lower the rating at the time of issue, the higher the default rate.
C) that no AAA rated bonds have defaulted.
D) AA bonds are the best investment based on lack of defaults.

Question

Quizplus · Accepted Answer

Altman's study on bond mortality primarily highlighted that the default rate of bonds is inversely related to their rating at the time of issuance. This means that bonds with lower ratings (closer to 'junk' status) at the time they are issued are more likely to default than those with higher ratings. This finding underscores the risk assessment embedded in bond ratings, where higher ratings reflect lower perceived risk of default.

Altman's Study of Bond Mortality Found