How do investors typically adjust their bond yield calculations if they doubt a borrower's creditworthiness?

Investors typically adjust their bond yield calculations based on their assessment of a borrower's creditworthiness. When there is doubt regarding a borrower's ability to meet their debt obligations, investors generally raise their yield calculations. This adjustment reflects the higher perceived risk associated with lending to a borrower who may be less likely to repay their debt.

Higher yields are often necessary to compensate investors for taking on that additional risk. Therefore, a bond issued by a borrower deemed less creditworthy would need to offer a higher yield to attract potential investors. This dynamic ensures that the pricing of bonds accurately reflects the underlying credit risk.

Choosing to not alter the yield calculation would not accurately represent the risk associated with the investment and could lead to significant financial loss. Hence, an accurate adjustment to the yield calculation is essential for informed investment decisions.