Choose correct answer

1. Bond ABC has a rating of C. Bond XYZ has a rating of AAA. Which of the following statement is true?

a) Bond ABC has a higher default risk compared to Bond XYZ

b) Default risk on both bond depends on its maturity

c) Both bond have an investment grade quality

d) Bond XYZ has a higher default risk compared to Bond ABC

e) default risk on both bond depends on their price.

2. Bond A has a rating of B

Bond B has a rating of AAA.

Which one of the following statements is true regarding these two bonds?

a) Bond A has an investment grade quality

b) Bond B has an investment grade quality

c) Required return on Bond A is lower than Bond B d) Required return on both bond doesn't depend on their credit rating

e) Required return on both bond is on the same level