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Which Company would have the highest bond spread (premium over the risk free rate)? A. AAA...

Which Company would have the highest bond spread (premium over the risk free rate)?

A. AAA corporation

B. B corporation

C. BB corporation

D. BBB corporation

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Answer #1

B. B corporation

As Bond rating decreases yield rate of bond increases. In above four corporation "B" is lowest rated thus, investor demands higher risk premium to take risk.

B corporation would have the highest bond spread.

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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