What are former investment-grade bonds that have dropped to junk status called__________?
Show answer Hide answer
Answer: B. fallen angel
Explanation
Bonds that were once investment grade but have been downgraded to junk status called fallen angels. Deteriorating financial health of the issuing corporation prompts credit agencies to lower ratings. Institutional investors face mandatory selling restrictions when bonds lose their investment-grade status. Investment-grade bonds maintain high credit ratings indicating low risk of default by the issuer. Junk bonds carry speculative ratings reflecting elevated credit risk and higher promised yields. Credit rating agencies monitor corporate balance sheets continuously to update bond classifications.
Distressed-debt hedge funds specialize in purchasing fallen angels during forced institutional sell-offs. Corporate management teams strive to avoid rating downgrades to prevent increased borrowing costs. Bond index funds must divest fallen angel holdings immediately upon official rating agency downgrades. Risen angel is an inverted term that does not match standard financial industry nomenclature. Fallen devil is an informal slang variation rather than the recognized financial market term. Risen devil is a fabricated phrase with no established meaning in fixed-income investing.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
Related questions
Q1. How are cash flows exhibiting more than one sign change classified__________?
Show answer Hide answer
Answer: A. non-normal cash flow
Cash flow streams with multiple sign changes from positive to negative and back are classified as non-normal cash flows. These complex cash flow patterns frequently occur in projects involving intermediate operational ex...
Q2. If a bond's call premium is $630 and its call price is $240, what is the bond's face value _____________?
Show answer Hide answer
Answer: C. 390
Face value is found by subtracting the call premium from the call price in standard problems. Performing the subtraction using the given figures yields the correct face value of three hundred ninety. This relationship en...
Q3. How are relatively long-term bonds issued by corporations classified
Show answer Hide answer
Answer: C. corporate bonds
Long-term debt securities issued by private corporations are corporate bonds. These instruments enable companies to borrow large sums of capital from public and institutional investors. Corporations promise to pay period...
Q4. By whom is the currency denomination for Eurobonds decided____________?
Show answer Hide answer
Answer: B. issuers of bonds
The currency denomination of a Eurobond is chosen exclusively by the issuing entity entering international markets. Issuers select the specific foreign currency that best matches their anticipated revenues and risk manag...
Q5. What represent project costs as cash outflows and are denoted by _________?
Show answer Hide answer
Answer: A. negative numbers
Project costs represent cash outflows and are conventionally denoted as negative numbers. Using negative signs for expenditures distinguishes money leaving the firm from cash inflows arriving. This mathematical conventio...
Q6. If conversion value is $8500 and the stock conversion rate is 430, what is the current market price of the stock _________?
Show answer Hide answer
Answer: C. 20.24
Current market price of the stock is derived from dividing the conversion value by the conversion rate (8500 / 430 = 20.24). The conversion ratio dictates how many shares of common stock are received upon converting the...