135k views
2 votes
10. Which of the following products is adversely impacted if the issuer’s credit rating is downgraded? a. Mutual funds

b. Unit investment trusts (UITs)
c. Exchange-traded funds (ETFs)
d. Exchange-traded notes (ETN)

User Henryabra
by
7.9k points

1 Answer

3 votes

Final answer:

An Exchange-traded note (ETN) (option d) is directly affected by the issuer's credit rating. If the issuer is downgraded, the risk of the ETN increases, potentially lowering its value.

Step-by-step explanation:

Which product is adversely impacted if the issuer's credit rating is downgraded? The correct answer is d. Exchange-traded notes (ETN). An Exchange-Traded Note (ETN) is a type of unsecured debt security, typically issued by a bank. If a bank's credit rating is downgraded, the risk associated with the ETN increases, and thus it may negatively affect the ETN's value. In contrast, mutual funds, unit investment trusts (UITs), and exchange-traded funds (ETFs) are not impacted in the same way because they are structured differently and are not reliant on the creditworthiness of a single issuer as ETNs are.

User Giorgi Moniava
by
9.5k points