A Credit-Sensitive Note (CSN)has a Coupon That Is Indexed to the Credit

A credit-sensitive note (CSN) has a coupon that is indexed to the credit rating of the issuer.When the credit rating worsens,CSNs pay a higher rate of interest and when the rating improves they pay a lower rate.Which of the following is the most valid?

A) The risk in these bonds is that they promise to pay a higher coupon when the company's ability to pay is the weakest.
B) The CSN has more risk for the investor than a fixed-coupon bond of the same issuer because the coupons are volatile.
C) Issuers of CSNs prefer to issue these bonds when their ratings are high.
D) CSNs are expensive because they require the issuer to re-rate its bonds more frequently and thereby incur additional costs.

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