What ratings comprise investment-grade bonds and what ratings are used for junk bonds?

Q: Why might a company choose to raise money through bonds, rather than take out a note payable or…

A: Bonds are the long-term liability of the company where the company raises the money in lieu of…

Q: Interest-rate risk results from:   a. Bond prices being fixed over the life of the bond b. Inflation…

A: Interest rate risk refers to the sensitivity of the bond prices to the interest rate changes. There…

Q: What are the more recently issued (and more frequently traded) bonds called? Why do investors favor…

A: The more recently issued (and more frequently traded) bonds are called Treasury Bonds which are…

Q: Which of the following statements about bonds is NOT true? O The less marketable a bond, the higher…

A: Interest rates and bond prices are closely tied. This is untrue since interest rates and bond prices…

Q: Why is it an interest rate risk when investing in long-term bonds?

A: Long-term bonds are those bonds that have the longest maturity offering from U.S. Treasury.…

Q: Who issues Bonds? Why should you own Bonds?  What are the risks of owning Bonds?

A: Bonds are the debt instrument issued to the bondholders of the organisation.

Q: less convex than otherwise similar securities without a p

A: Step 1 A putable bond is a form of bond in which the holder (investor) has the right but not the…

Q: What are potential problems or limitations of using methods, to estimate the cost of debt, that rely…

A: Bond Ratings are the metrices used to determine the bond's quality and riskiness. It is the rating…

Q: Debt Securities - These securities are in the form of debt or borrowings which have to be repaid by…

A: Debt Securities or Debt Instruments - Debt securities are financial instruments that provide their…

Q: Should financial institutions invest in junk bonds?

A: The answer for the theory question on junk bonds is discussed hereunder.  Dear student,  As you have…

Q: Why do most municipal bonds pay lower interest than riskless Treasury bonds?

A: Municipal as well as Treasury bonds are backed by the government and therefore are less risky. The…

Q: What are the risks associated with stocks that may not be also in bonds?

A: The question is based on the concept of different types of risk associated with different financial…

Q: If you are an investor will you choose to investment in bonds? Why?

A: Bond is a debt security.

Q: True or false: The financial status of the issuer will affect the coupon rate that issuer pays on…

A: The coupon rate on a bond is a crucial element determined by various factors, reflecting the…

Q: Which of the following lowers the required interest rate that firms have to pay on their bonds?…

A: Companies tend to pay larger interest rates as the risk is raised to the bond investor since the…

Q: Why is the yield of bonds with credit risk higher than that of otherwise identical default-free…

A: The question is based on the concept of calculation of yield to maturity in bond investment , the…

Q: What is a bond spread and how is it related tothe default risk premium? How are bond ratingsrelated…

A: Bond spread: It is the difference between the yields of two bonds.

Q: Explain callable and putable bonds in detail. Why are they important to issuing firms or investors?

A: Callable bond: The bond having the privilege to redeem by the issuer before maturity.   Puttable…

Q: Why are investment-grade bonds more marketable and why are junk bonds issued at all?

A: Introduction: Bond is nothing but debt securities issued by a company or government if they want to…

Q: Which of the following would not be obtained on a listed debt market? Select one: a. Commercial…

A: Commercial Paper: A  corporation issues commercial paper to tide over its short-term working capital…

Q: Are interest rates of junk bonds always higher or lower than investment-grade bonds? Why?

A: A bond is a financial instrument that pays interest to the investor periodically and return of…

Q: What are the potential problems or limitations of using methods, to estimate the cost of debt, that…

A: The cost of debt is the rate that is paid by a corporation on its debt. The debt may include bonds,…

Q: What are junk bonds?

A: Answer: A junk bond is a high risk and high yield bond often considered as unsecured bond that is…

Q: What are the similarities and differences between mortgage securities and corporate bonds?

A: Introduction: Mortgage related security is a form of security in which investor collects payment…

Q: 2) Which should have the higher risk premium on its interest rates, a corporate bond with a Moody's…

A: Risk premium means it is investment return, an asset is expected to yield a surplus of a risk-free…