Question: Bond ratings are important because they are: Multiple Choice determined by default and liquidity risk and help investors determine the appropriate price they should pay.

Bond ratings are important because they are:

Multiple Choice

  • determined by default and liquidity risk and help investors determine the appropriate price they should pay.

  • determined by the firm's default and liquidity risks and determine whether the bond will appeal to taxable or tax-free investors.

  • determined by default risk and help firm's decide if a bond should have a call feature.

  • determined by default and inflation risk and relate to the likelihood that they bond will be fully subscribed.

  • determined by a firm's default risk and will affect the cost of borrowing money.

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