Fixed Income Q127

127An investor buys AAA-rated bonds and wants to hold it to maturity. He expects that since the bond is AAA rated the bond will continue to have the lowest probability of default till maturity. Is the investor correct?

A
Investor is correct.
B
The investor is incorrect because rating agencies may review and change rating at any time before maturity.
C
Investor is incorrect because AAA rated bonds have greater chances of default as compared to A+ rated bonds.

Option : B
Explanation : Investor is incorrect because rating agencies may review and change rating at any time before maturity. If the rating is downgraded in the future, it reflects greater probability of default.

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