SIE practice questionhardBond Ratings
A municipal bond downgrade from A to BBB would most likely result in:
- AImproved credit quality
- BHigher price and lower yield
- CLower call risk
- DA decline in bond price and higher yield✓ Correct answer
Explanation
Why D — A decline in bond price and higher yield
Lower ratings mean more risk, driving price down and yields up. Call risk and credit quality improve only when ratings rise.
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