Bond rating systems
A) report levels of risk relative to other bonds.
B) have little relationship to the actual risk.
C) reclassify all bonds when the economy changes.
D) maintain a fixed yield spread between rating levels.

Question

Quizplus · Accepted Answer

Bond rating systems report levels of risk relative to other bonds, providing investors with a measure of the creditworthiness of a bond issuer. The higher the rating, the lower the perceived risk, and vice versa. While the rating system is not perfect and does not guarantee against default, it is an important tool for investors to assess risk and make informed investment decisions.

Bond Rating Systems