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SIE: Debt Securities
SIE practice questionhardBond Ratings

A municipal bond downgrade from A to BBB would most likely result in:

  1. AImproved credit quality
  2. BHigher price and lower yield
  3. CLower call risk
  4. DA decline in bond price and higher yield✓ Correct answer
Explanation

Why DA 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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