Question

1) Pick the FALSE statement with regard to non-investment grade debt

A. They have a credit rating of A by Moody's and DBRS

B. They are used as an attractive financing vehicle

C. They are junk bonds

D. They are high-yield

2) The provision that facilitates the orderly retirement of the bond issue is known as

A. a retractable clause

B. a redemption clause

C. a sinking fund

D. a retirement clause

3) A bond with a 17% coupon rate, and a face value of $1000, a 17% YTM and 17 years to maturity is trading at

A. par

B. premium

C. discount

D. none of the above

Answer 1

1.non investment grade that are those debt which have a lower rating and they are not categorised under A category so the statement which says that they have a credit rating of A by Moody's and DBRS are completely false because they will be having a lower credit rating.

all the other statements are true because they can be used as attractive financial vehicle as they are offering high yield and they are junk bonds also

Correct answer is option ( A)they have a credit rating of A by moody and DBRS.

2.(C) sinking fund will be providing the facility of orderly retirement of the bond issue and this is used by the company to a large extent.

Correct answer will be option ( C) sinking fund

3.(A) PAR, because the coupon rate and yield to maturity are same.

Correct answer will be option (A) PAR