If Moody's or Standard and Poor's downgrades its rating on a corporate bond,the demand for the bond ________ and its yield ________.
A) increases; decreases
B) decreases; increases
C) increases; increases
D) decreases; decreases

Question

Quizplus · Accepted Answer

When a credit rating agency such as Moody's or Standard and Poor's downgrades its rating on a corporate bond, it indicates a higher risk of default. As a result, investors demand a higher yield to compensate for the increased risk, leading to a decrease in demand for the bond and an increase in its yield.

If Moody's or Standard and Poor's Downgrades Its Rating on a Corporate