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Bonds 201: Junk Bonds

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1.
Credit analysis includes researching a company's entire industry.
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True. Looking at other companies in the same industry is part of credit analysis.
2.
Low bond liquidity can lead to lower transaction costs.
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False. Low bond liquidity leads to higher trading costs.
3.
Bonds with the highest grade are rated _______.
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AAA. Bonds least likely to default are graded "AAA."
4.
Interest rates tend to be less important than company earnings to the price of a junk bond.
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True. Junk bond prices tend to be more affected by company revenues than interest rates.
5.
Default loss rates measure the change in a bond's _______ due to a default.
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Price. Default loss rates measure the impact of a default on a bond's price.