The reason why companies do not rate junk bonds Introduction: A bond refers to the debt securities issued by the governments or corporations for raising capital. The borrower does not return the face value until maturity. However, the investor receives the coupons every year until the date of maturity. Junk bonds are bonds with a rating below the investment grade. The rating agencies rate junk bonds below the investment grade (BBB or Bbb). Hence, junk bonds will have ratings such as BB, Ba, B, CCC, Caa, CC, Ca, C, and D. The yields and the default risk of junk bonds are very high.

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Chapter 7, Problem 9CRCT

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To discuss: The reason why companies do not rate junk bonds

Introduction:

A bond refers to the debt securities issued by the governments or corporations for raising capital. The borrower does not return the face value until maturity. However, the investor receives the coupons every year until the date of maturity.

Junk bonds are bonds with a rating below the investment grade. The rating agencies rate junk bonds below the investment grade (BBB or Bbb). Hence, junk bonds will have ratings such as BB, Ba, B, CCC, Caa, CC, Ca, C, and D. The yields and the default risk of junk bonds are very high.

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