Downgrade risk

CFA Level I
#1

Which bond has a highest downgrade risk a AA bond or a BB bond and why? Thank You

#2

I don’t believe you can answer that question with the information given.

#3

You can’t answer that question unless perhaps if you’re provided with a ratings transition matrix.

#4

Ok, I understand thanks, I don’t know where I saw a question like that, and I didn’t know what to do. I am just going to ignore the question

#5

I think what you are thinking of here is a situation like this… Which bond has a highest downgrade risk a BBB bond or a BB bond and why? The answer here would be a BBB bond as it is dropping from investment grade to non-investment grade. That is the only situation where I could see a definitive answer, otherwise you would need a transition matrix as stated above.

#6

@CFAbooked, yeah that makes more sense. I think that was what I was looking for. Thank You.