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Two bonds are rated BB+ and BBB+. Which is probably the riskier investment? Which would you...

Two bonds are rated BB+ and BBB+. Which is probably the riskier investment? Which would you expect to have the higher yield? Is it possible to predict which would have the higher coupon rate?

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Answer #1

BBB+ bonds are always considered investment-grade and they are of better quality.

BB+ will always be considered non investment grade and they do not have adequate quality.

BB+ is the riskier investment and it is expected to have the higher yield because it have a higher risk so it will provide a higher rate of return to compensate the risk.

Bonds with lower quality which is BB+ will be having higher coupon because it will provide a higher rate of coupon in order to attract customers to invest into these bonds because they have low quality.

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