Products & Their RisksQuestion 151 of 398
Credit (default) risk is best measured for a corporate bond by looking at its:
a.Coupon frequency
b.Trading volume
c.Time to maturity
d.Rating from a nationally recognized statistical rating organization
Explanation
Credit or default risk is the chance the issuer will fail to make interest or principal payments. Rating agencies such as Moody's, S&P, and Fitch assign ratings (for example, AAA down to below investment grade) that summarize an issuer's creditworthiness. Lower-rated (high-yield or 'junk') bonds carry greater default risk and therefore pay higher yields.
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