CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

A decline in an issuer's creditworthiness is called ______.
A. increased default risk
B. downgrade risk
C. credit risk
Explanation: Bond-rating downgrades imply higher risk to the investor and cause the yield spread to widen. The overall cost to the issuer increases on new debt being issued. Oftentimes, the price (yield) in the marketplace will decline (increase) in anticipation of a bond-rating downgrade or announcement.

User Contributed Comments 2

User Comment
alexchav Assuming rating agencies do their job correctly!
rojaslav They generally do
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