What type of risk is being rated when bond agencies assign ratings to outstanding debt? What are the two main reasons for having bond agencies rate bonds?
What will be an ideal response?
Answer: Bond rating agencies assess default risk. Bonds are rated by agencies for two primary reasons. First, the agencies are able to provide reliable information to potential investors at a reasonable cost. Without this service, investors would have to develop the resources and expertise to properly access the creditworthiness of thousands of potential bond issuers. Second, from the bond issuer's perspective, issuers of bonds are seeking to send a reliable signal to the market about the firm's ability to meet the financial obligations of the bond issue. Accurate information and a reduction in uncertainty in the marketplace can help raise the price of a bond. Thus, rating agencies, in effect, help market the bond.
You might also like to view...
The external forces are commonly called _________ forces, which are the external forces that management has no direct control over, although it can exert influence.
Fill in the blank(s) with the appropriate word(s).
Distribution channel members selling goods directly to the consumer, generally in small
quantities, are called ________. A) distributors B) jobbers C) retailers D) wholesalers
The ultimate goal of most market-oriented firms is profitability that results from satisfying the wants and needs of its consumers.
Answer the following statement true (T) or false (F)
Consumers are randomly selected and asked to try one of three products and then give it a score between 1 and 10, with a higher score being better. Which test would you use to determine if the product evaluations differed?
a. A chi-square test b. A test of proportions c. Kruskal-Wallis test d. Wilcoxon rank sum test