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    Bond Ratings

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    There is an inverse relationship between bond ratings and the required return on a bond. The required return is lowest for AAA rated bonds, and required returns increase as the ratings get lower. (worse)

    a. true
    b. false

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    Solution Preview

    a. true

    "Treasury notes are negotiated at higher prices than those of corporate bonds because there is a greater risk of default with bonds. That is why prices are estimated charging them with the highest discount rate (or yield-to-maturity). Then you require of a greater coupon yield (and ...

    Solution Summary

    This posting answers the student's question on bond ratings and gives references for the same.