Question
A broker is trying to persuade you to invest in the CCC-rated corporate bonds of iHeart radio. You currently own a portfolio of AAA-rated bonds
A broker is trying to persuade you to invest in the CCC-rated corporate bonds of iHeart radio. You currently own a portfolio of AAA-rated bonds and evaluate investments based on their Sharpe ratios, CV and/or default risk premia. In order to be persuaded to trade in your AAA-rated bonds for the iHeart radio bonds:
A.
The expected Sharpe ratio must be lower than that of your current bond investments.
B.
The Sharpe ratio must be at least as high as what you expect from your current bond investments, the expected CV must be lower than your current bond investments, and the expected DRP must be higher.
C.
The expected DRP must be lower than that of your current bond investments.
D.The expected CV must be higher than your current bond investments and the expected DRP must be lower
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