Question

A credit downgrade typically results in​ _________ interest rate for new debt. A. no change in B. not enough information to tell C. a higher D. a lower 2. There​ is​ a(n)​ _________ relationship between the price of an outstanding bond and market interest rates. A. none of the above B. positive C. direct D. inverse 3. The greater the volatility of earnings the​ ______________ the bond rating when everything else is held constant. A. there is no relationship between earnings and bond rating. B. higher C. lower D. volatility is irrelevant when evaluating earnings

Answer 1

Answer and Explanation:

1. If there is the downgrade of credit than there would be a higher rate of interest charged for a new debt

2. Also, there is an inverse relationship between the outstanding bond price and the market rate of interest i.e if the bond price is increased the rate of interest is less and vice versa

3. And if the volatility of the earning is high that leads to less rating of bond keeping the other things constant