Considering the ratings, the bonds that have lowest spread of interest as compared to similar maturity in Treasury Securities are classified as ______________?
Correct answer: B. triple A rating bonds
- A. triple B rating bonds
- B. triple A rating bonds
- C. double A rating bonds
- D. double A rating bonds
Explanation
Triple-A bonds have the highest credit quality, so investors demand the smallest yield spread over Treasury securities of similar maturity. Lower ratings such as AA or BBB require a larger spread to compensate for greater default risk.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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