3 4. What is the highest Standard & Poor's rating that is still classified as "Junk Bonds? a. A b. BBB C. BB d, B 5. You are studying two bonds, Bond A (a high yield bond) and Bond B (a low yield bond). You expect the difference between the yields to increase. What happens to the price of the bonds? a. Bond A price decreases, Bond B price increases b. Bond A price increases, Bond B price decreases c. Bond A price decreases, Bond B price decreases d. Bond A price increases, Bond B price increases 6. Which of the following is correct: a. Credit spreads fluctuate with the Fed funds interest rate b. Credit spreads fluctuate as a company issues more debt c. Credit spreads fluctuate as the probability of default changes by the issuer d. Credit spreads fluctuate as investors demand for a corporate bond issuance increases 7. Companies that repurchase their shares are generally trying to do the following, except: a. Increase their per share earnings b. Decrease the number of shares outstanding c. Increase their share price d. Decrease their dividends on a per share basis