Rank order from highest credit risk to lowest risk the following bonds, with the
ID: 2779200 • Letter: R
Question
Rank order from highest credit risk to lowest risk the following bonds, with the same time to maturity, by their yield to maturity: JM Corporate bond with yield of 4.25 percent, IB Corporate bond with yield of 6.49 percent, TC Corporate bond with yield of 10.76 percent, and B&O Corporate bond with a yield of 9.99 percent.
JM bond, TC bond, B&O bond, IB bond
JM bond, IB bond, TC bond, B&O bond
TC bond, B&O bond, IB bond, JM bond
JM bond, IB bond, B&O bond, TC bond
JM bond, TC bond, B&O bond, IB bond
JM bond, IB bond, TC bond, B&O bond
TC bond, B&O bond, IB bond, JM bond
JM bond, IB bond, B&O bond, TC bond
Explanation / Answer
Higher the yield, higher the cost of debt to the company. Hence, bond having high YTM is high risky.
Hence, correct option is TC bond, B&O bond, IB bond, JM bond
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