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    Question

    A company’s 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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