Which of the following statements is false? 1 )Because the cash flows promised by the bond are the most that bondholders can hope to receive, the cash flows that a purchaser of a bond with credit risk expects to receive may be less than that amount. 2) By consulting bond ratings, investors can assess the creditworthiness of a particular bond issue. 3.Because the yield to maturity for a bond is calculated using the promised cashflows, the yield of bonds with credit risk will be lower than that of otherwise identical default-free bonds. 4) A higher yield to maturity does not necessarily imply that a bond's expected return is higher. 5) none of the answers are correct
Which of the following statements is false? 1 )Because the cash flows promised by the bond are the most that bondholders can hope to receive, the cash flows that a purchaser of a bond with credit risk expects to receive may be less than that amount. 2) By consulting bond ratings, investors can assess the creditworthiness of a particular bond issue. 3.Because the yield to maturity for a bond is calculated using the promised cashflows, the yield of bonds with credit risk will be lower than that of otherwise identical default-free bonds. 4) A higher yield to maturity does not necessarily imply that a bond's expected return is higher. 5) none of the answers are correct
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Which of the following statements is false?
1 )Because the cash flows promised by the bond are the most that bondholders
can hope to receive, the cash flows that a purchaser of a bond with credit risk
expects to receive may be less than that amount.
2) By consulting bond ratings, investors can assess the creditworthiness of a
particular bond issue.
3.Because the yield to maturity for a bond is calculated using the promised cashflows, the yield of bonds with credit risk will be lower than that of otherwise
identical default-free bonds.
4) A higher yield to maturity does not necessarily imply that a bond's expected
return is higher.
5) none of the answers are correct
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