Bond ratings directly affect a bond's

Question

Quizplus · Accepted Answer

Bond ratings directly affect a bond's spread over the Treasury yield, as they indicate the creditworthiness of the issuer and affect the level of risk associated with the bond. A higher rating will typically result in a lower spread, reflecting lower risk and a lower cost of borrowing for the issuer. Conversely, a lower rating will generally result in a higher spread, reflecting higher risk and a higher cost of borrowing. Bond ratings do not directly affect the bond's coupon rate, maturity date, or call provisions.

Bond Ratings Directly Affect a Bond's