Bonds are like loans the issuers get from investors. Just as your credit worthiness is evaluated when you apply for a loan, the credit worthiness of the bond also needs to be evaluated. To do this, independent agencies have created a rating system. To help investors evaluate bonds, private rating agencies such as Moody’s and Standard & Poor’s assign grades to designate a bond’s quality. Which of the following statements regarding the rating system are correct? Check all that apply. Once a bond receives a rating, it cannot be changed. A bond rated Ba by Moody’s is comparable to a bond rated BB by Standard & Poor’s. Different rating systems are used for corporate versus municipal bonds. The average yields on Aaa bonds are generally lower than the average yields on Baa bonds. The rating C signifies a lower risk of default than a B rating. The following chart shows the distribution of Moody’s ratings for municipal bonds between 1970 and 2000.
Bonds are like loans the issuers get from investors. Just as your credit worthiness is evaluated when you apply for a loan, the credit worthiness of the bond also needs to be evaluated. To do this, independent agencies have created a rating system. To help investors evaluate bonds, private rating agencies such as Moody’s and Standard & Poor’s assign grades to designate a bond’s quality. Which of the following statements regarding the rating system are correct? Check all that apply. Once a bond receives a rating, it cannot be changed. A bond rated Ba by Moody’s is comparable to a bond rated BB by Standard & Poor’s. Different rating systems are used for corporate versus municipal bonds. The average yields on Aaa bonds are generally lower than the average yields on Baa bonds. The rating C signifies a lower risk of default than a B rating. The following chart shows the distribution of Moody’s ratings for municipal bonds between 1970 and 2000.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Bonds are like loans the issuers get from investors. Just as your credit worthiness is evaluated when you apply for a loan, the credit worthiness of the bond also needs to be evaluated. To do this, independent agencies have created a rating system.
To help investors evaluate bonds, private rating agencies such as Moody’s and Standard & Poor’s assign grades to designate a bond’s quality. Which of the following statements regarding the rating system are correct? Check all that apply.
Once a bond receives a rating, it cannot be changed.
A bond rated Ba by Moody’s is comparable to a bond rated BB by Standard & Poor’s.
Different rating systems are used for corporate versus municipal bonds.
The average yields on Aaa bonds are generally lower than the average yields on Baa bonds.
The rating C signifies a lower risk of default than a B rating.
The following chart shows the distribution of Moody’s ratings for municipal bonds between 1970 and 2000.
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