[Solved] Which of the Following Statements Are TRUE
Question 23
Multiple Choice
Question 23Which of the following statements are TRUE?
A)A decrease in default risk on corporate bonds lowers the demand for these bonds,but increases the demand for default-free bonds.
B)The expected return on corporate bonds decreases as default risk increases.
C)A corporate bond's return becomes less uncertain as default risk increases.
D)As their relative riskiness increases,the expected return on corporate bonds increases relative to the expected return on default-free bonds.
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Related Questions
- Q18: An increase in default risk on corporate bonds ________ the demand for these bonds,but ________ the demand for default-free bonds,everything else held constant. A)increases;lowers B)lowers;increases C)does not change;greatly increases D)moderately lowers;does not change
- Q19: A decrease in default risk on corporate bonds ________ the demand for these bonds,and ________ the demand for default-free bonds,everything else held constant. A)increases;lowers B)lowers;increases C)does not change;greatly increases D)moderately lowers;does not change
- Q20: As default risk increases,the expected return on corporate bonds ________,and the return becomes ________ uncertain,everything else held constant. A)increases;less B)increases;more C)decreases;less D)decreases;more
- Q21: As default risk decreases,the expected return on corporate bonds ________,and the return becomes ________ uncertain,everything else held constant. A)increases;less B)increases;more C)decreases;less D)decreases;more
- Q22: As their relative riskiness ________,the expected return on corporate bonds ________ relative to the expected return on default-free bonds,everything else held constant. A)increases;increases B)increases;decreases C)decreases;decreases D)decreases;does not change
- Q24: Everything else held constant,if the federal government were to guarantee today that it will pay creditors if a corporation goes bankrupt in the future,the interest rate on corporate bonds will ________ and the interest rate on Treasury securities will ________. A)increase;increase B)increase;decrease C)decrease;increase D)decrease;decrease
- Q25: Bonds with relatively high risk of default are called A)Brady bonds. B)junk bonds. C)zero coupon bonds. D)investment grade bonds.
- Q26: Junk bonds,bonds with a low bond rating,are also known as A)high-yield bonds. B)investment grade bonds. C)high quality bonds. D)zero-coupon bonds.
- Q27: Bonds with relatively low risk of default are called ________ securities and have a rating of Baa (or BBB)and above;bonds with ratings below Baa (or BBB)have a higher default risk and are called ________. A)investment grade;lower grade B)investment grade;junk bonds C)high quality;lower grade D)high quality;junk bonds
- Q28: Which of the following bonds would have the highest default risk? A)municipal bonds B)investment-grade bonds C)U)S. Treasury bonds D)junk bonds
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