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      Question

      A companyтАЩs credit rating has been downgraded from AA+

      to A. What implication does this carry for investors?
      A Lower coupon rates Correct Answer Incorrect Answer
      B Reduced credit risk Correct Answer Incorrect Answer
      C Higher return expectations and lower bond prices Correct Answer Incorrect Answer
      D No impact on trading Correct Answer Incorrect Answer
      E Fixed repayment schedule Correct Answer Incorrect Answer

      Solution

      A downgrade indicates increased credit risk. Investors will demand higher returns, causing bond prices to fall. It reflects weaker financials or reduced repayment confidence.

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