Compare and contrast the difference between Bond Ratings and Bond Rating Agencies and the Bond Market. Provide a real word application and experiential example of Bond Ratings and Bond Rating Agencies.
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Compare and contrast the difference between Bond Ratings and Bond Rating Agencies and the Bond Market. Provide a real word application and experiential example of Bond Ratings and Bond Rating Agencies.
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- Who rates bonds, andwhat are some of the factors the rating agenciesconsider?Explain why yields, investment objectives, risk profiles, knowledge, and timing the market serve as guidelines in buying bonds. Include examples.Bond rating agencies like Moody's and Fitch specialize in: O A. guaranteeing a specific interest rate payment by bond issuers to investors O B. assessing the liquidity risk of issuers. OC. assessing the credit and default risk of issuers. O D. assessing the credit, default and liquidity risk of issuers.
- Do bond ratings adjust immediately to changes in credit quality? Explain.different types of risk that bond investors and issuers face, and discuss how a bond’s terms and collateral can be changed to affect its interest rateTo provide credit rating in the bond market, Bonds are given rankings according to their investment quality, i.e., investment grade and non-investment grade. Which of the following is a measure of the highest investment grade bond? ABC Bbb AAA Ccc- None of the above.
- What is the relationship between bond prices and interest rates? Describe the process of establishing this link in detail. What approach may we use to determine the bond's value based on this relationship?What are potential problems or limitations of using methods, to estimate the cost of debt, that rely on bond ratings?To understand how bonds work and how they are priced, we have to have an understanding of what determines a bond’s price. One of the most important factors to consider when pricing bonds is the prevailing market rate of interest for bonds of similar risk in terms of duration and quality. In your response to this question, you should highlight the relationship between bond prices and interest rates and indicate what risks are considered when we price bonds. Include at least two citations that support your response.