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8. Which of the following is (are) true for a fixed-coupon corporate bond? Assume information
dissemination is perfect and all investors know the latest information about the company.
I. The required credit risk premium increases when creditworthiness (ability to pay principal and
interest) of the company declines.
II. Bond rating agencies downgrades the credit rating when creditworthiness (ability to pay
principal and interest) of the company declines.
III. The bond price declines when creditworthiness (ability to pay principal and interest) of the
company declines (holding other factors unchanged).

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  • 1. 8. Which of the following is (are) true for a fixed-coupon corporate bond? Assume information dissemination is perfect and all investors know the latest information about the company. I. The required credit risk premium increases when creditworthiness (ability to pay principal and interest) of the company declines. II. Bond rating agencies downgrades the credit rating when creditworthiness (ability to pay principal and interest) of the company declines. III. The bond price declines when creditworthiness (ability to pay principal and interest) of the company declines (holding other factors unchanged).