Which of the following statements is not true regarding bond ratings? Select one: C a. The ratings assigned are meant to indicate the probability of default for the bond issuer. b. The bonds assigned one of the top four rating classes are considered investment grade bonds. C. Once a rating is assigned to an issue it cannot be changed for the first two years after which it is reviewed on a regular basis. d. Bonds rated BB and below are referred to as high yield or "junk" bonds.

Which of the following statements is not true regarding bond ratings? Select one: C a. The ratings assigned are meant to indicate the probability of default for the bond issuer. b. The bonds assigned one of the top four rating classes are considered investment grade bonds. C. Once a rating is assigned to an issue it cannot be changed for the first two years after which it is reviewed on a regular basis. d. Bonds rated BB and below are referred to as high yield or "junk" bonds.

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter11: Bond Pricing And Amortization (bonds)

Section: Chapter Questions

Problem 3R

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From page 9-2 of the VLN, what is the first thing you want to identify when approaching a bond problem? Group of answer choices A. Annual bond or semiannual bond B. Whether the market rate is different from the stated rate. C. The cash flows provided by the bond. D. The company's debt to equity ratio.
(i) Based on the details of the three bonds, analyse which bond will be priced at the biggest discount.(ii) If the interest rate were to increase, discuss which bond will be affected most.(iii) If the bond rating for Bond A is lowered to BBB, discuss what must happen to the yield to maturity.
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Which of the following about bonds is false? OA. Higher bond rating indicates higher probability of default. OB. An indenture is the legal agreement between the firm issuing the bond and the trustee who represents the bondholders. OC.Call protection period where the firm cannot call the bond for a specified period of time. OD.A mortgage bond is secured by a lien on real property. OE. Both A and B.
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PROBLEM: 1. Match the following bond classifications with the appropriate characteristic by entering the appropriate letter in the space provided. Zero-coupon bonds f. Callable bonds а. Debenture bonds е. Mortgage bonds Registered bonds d. b. с. Convertible bonds g. h. Coupon bonds Serial bonds 1. Portions of the bond mature in periodic installments. 2. Unregistered bonds. 3. Bonds that are secured by a lien against specific assets. 4. Bonds that can be exchanged for a predetermined number of shares of stock. 5. Bonds whose marketability is based on the general credit rating of the issuing company. 6. Bonds whose interest is paid to the individuals listed in the corporate records as owners of the bonds. 7. Bonds that the company has the right to retire before their maturity date. 8. Bonds on which no interest is paid until the maturity date.
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