📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!


    Question

    One of the primary reasons banks do not invest in

    non-investment grade bonds (BBB or lower rated securities) is:
    A Lack of government backing for such securities Correct Answer Incorrect Answer
    B The presence of high tax rates on low-rated bonds Correct Answer Incorrect Answer
    C The significant credit risk associated with default possibilities Correct Answer Incorrect Answer
    D Regulatory restrictions imposed by SEBI and RBI Correct Answer Incorrect Answer
    E Low trading volumes in such bonds Correct Answer Incorrect Answer

    Solution

    Non-investment grade bonds (junk bonds) carry high default risk. To protect their capital and meet regulatory norms, banks avoid these risky investments.

    Practice Next

    Relevant for Exams:

    ask-question