Question: Based upon historic information there is no relationship between bonds ratings and the frequency of default. True False Flag this Question A bond has a

Based upon historic information there is no relationship between bonds ratings and the frequency of default.

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False

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A bond has a $1,000 par value, the annual coupon interest rate equals 10% (the bond makes annual interest payments of $100), has 5 years to maturity, cannot be called, is not a convertible bond and is not expected to default. The bond should sell at a premium if the yield to maturity is below 10% and at a discount if the yield to maturity is greater than 10%.

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