There is an inverse relationship between bond ratings and the required return on a bond. The required return is lowest for AAA rated bonds, and required returns increase as the ratings get lower (worse).

Question

Quizplus · Accepted Answer

This statement is true, as bond ratings are a measure of the creditworthiness of the issuer and the required return is the minimum return investors require in exchange for the risk of lending money. A higher credit rating indicates lower risk of default and therefore a lower required return.

There Is an Inverse Relationship Between Bond Ratings and the Required