Banks are generally not allowed to invest in speculative grade bonds.What kind of risk is this designed to limit?
A)Liquidity risk
B)Business risk
C)Credit risk
D)Operational risk
E)Interest rate risk

Question

Quizplus · Accepted Answer

The fact that banks are not allowed to invest in speculative grade bonds is designed to limit credit risk. Speculative grade bonds have a higher risk of default, meaning that the borrower is more likely to be unable to make interest payments or repay the principal amount of the loan. This presents credit risk for the bank.

Banks Are Generally Not Allowed to Invest in Speculative Grade