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Investors who purchase bonds having lower credit ratings should expect: higher yields to maturity. lower default...

Investors who purchase bonds having lower credit ratings should expect:

higher yields to maturity.

lower default possibilities.

lower coupon payments.

higher purchase prices.
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Answer #1

Investors who purchase bonds having lower credit ratings should expect:

higher yield to maturity

Lower credit ratings assigned to bond is a significance of the fact that probability of default is higher in these bonds. They have higher yield to maturity since coupon payments are comparitively larger than other bonds. The coupon payments are offered at a higher rate in order to attract the investors. However, the probability of default is higher in these bonds. Hence, the options (lowert default possibilities, lower coupon payments & higher purchase prices) are incorrect.

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