Rohan decides to invest in bonds instead of stocks because he has heard that bonds are a lower-risk investment. He uses the bond's credit rating to make his investment decisions.Which of the following is true about the risk Rohan faces with his decision?The bonds' value is not affected by inflation because most bonds pay a fixed coupon rate over time.The credit ratings of the bond-issuing companies will not change from one year to the next.The bond issuer may not pay him back because it may go bankrupt or become insolvent.If Rohan chooses bonds from a company with low credit ratings, he's almost certain to have low default risk.

Bonds are units of corporate debt being issued by companies and also being securitized as tradeable…

Answered: The bonds' value is not affected by…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Rohan decides to invest in bonds instead of stocks because he has heard that bonds are a lower-risk investment. He uses the bond's credit rating to make his investment decisions.

Which of the following is true about the risk Rohan faces with his decision?

The bonds' value is not affected by inflation because most bonds pay a fixed coupon rate over time.
The credit ratings of the bond-issuing companies will not change from one year to the next.
The bond issuer may not pay him back because it may go bankrupt or become insolvent.
If Rohan chooses bonds from a company with low credit ratings, he's almost certain to have low default risk.

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