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Answer: It is not investment-grade
The correct answer is **A. It is not investment-grade**. **High-yield** is a ratings-based classification. A bond is either: - **Investment-grade**, or - **High-yield** (also called speculative or junk) If the bond is currently high-yield, then it must be **non-investment-grade** now. However, it was not necessarily always high-yield in the past. Why the others are not required: - **B**: A bond can be downgraded from investment-grade to high-yield. - **C**: High-yield bonds are often subordinated or unsecured, but not always. - **D**: High-yield status is not defined by yield spread or interest-rate risk; it is defined by credit rating.
Author: Manit Arora
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Question 507.3. Keedsler Motors issued a bond five years ago which is currently a high-yield bond. Each of the following is not necessarily true, except which of the following MUST be true about this bond?
A
It is not investment-grade
B
It was never investment-grade
C
It is subordinated and/or unsecured
D
It has a yield at least 100 basis points above the benchmark and offers more interest rate risk than credit risk
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