Fixed Income - Fixed Income Section 2
- Option : C
- Explanation : The subordinated bond would have its rating notched lower than the company’s BBB rating by one notch.
- Option : B
- Explanation : Investor is incorrect because rating agencies may review and change rating at any time before maturity. If the rating is downgraded in the future, it reflects greater probability of default.
58. Which of the following is least likely a risk of relying on rating from credit rating agencies?
- Option : B
- Explanation : Among the mentioned list the “default risk is difficult to assess” is not the risk of relying on ratings from the credit rating agencies.
59. Which of the following is least likely to be a limitation of a credit rating agency’s ratings?
- Option : B
- Explanation : Options A and C are true statements and represent limitations of credit ratings. Option B does not represent a limitation. Credit ratings can be used to compare bonds across different industries.
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