Fixed Income Q134

0. A bond’s price did not fall when it was downgraded by Moody’s. Which of the The following is the most likely explanation?

  • Option : C
  • Explanation : The market was anticipating the rating downgrade and had already priced it in. Bond prices often do react to rating changes, particularly multi-notch ones. Even if bonds don’t trade, their prices adjust based on dealer quotations given to bond pricing services.
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