Firm ZLX is found by Standard & Poor to have a very low probability of default, and rates the firm AA-. In contrast, Standard & Poor rates firm ABX as likely to default, and rates the firm BB. Given this information, which do we expect to be true regarding the relation between the firm's yield-to-maturity (YTM)? 1) YTM of ZLX > YTM of ABX 2) YTM of ZLX = YTM of ABX 3) YTM of ZLX < YTM of ABX
Firm ZLX is found by Standard & Poor to have a very low probability of default, and rates the firm AA-. In contrast, Standard & Poor rates firm ABX as likely to default, and rates the firm BB. Given this information, which do we expect to be true regarding the relation between the firm's yield-to-maturity (YTM)? 1) YTM of ZLX > YTM of ABX 2) YTM of ZLX = YTM of ABX 3) YTM of ZLX < YTM of ABX
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Firm ZLX is found by Standard & Poor to have a very low probability of default, and rates the firm AA-. In contrast, Standard & Poor rates firm ABX as likely to default, and rates the firm BB. Given this information, which do we expect to be true regarding the relation between the firm's yield-to-maturity (YTM)?
1) YTM of ZLX > YTM of ABX
2) YTM of ZLX = YTM of ABX
3) YTM of ZLX < YTM of ABX
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