In: Finance
2. Consider the United States Treasury bonds, what are the ratings? Historically, has there ever been a change in quality ratings for the U.S. government? (Hint: You can review the past 15-20 years). Why or why not?
3. Consider a company that has an investment grade rating, are they guaranteed to be protected from Bankruptcy?
2. United States treasury bonds are considered to be risk free in nature and these treasury bonds are having the lowest possible risk as they are AAA rated which is a representation of the the lowest possible degree of risk and they also have the backing of the Federal government.
There has been a change in the rating at the time of 2008 financial crisis when there was a risk related to financial insolvency of various companies and it was reflected into United States treasury Bond which was downgraded by many rating agencies but it was still in the investment category but the risk associated with investment in these bonds have also been higher due to risk of a financial collapse.
2. No ,whent investment grade rating has been issued to a company it will not mean that it is going to protect it from the bankruptcy because investment grading is just protection from risk associated with the market changes but not it is guaranteeing any kind of protection from bankruptcy because it is just a rating which has been issued by the credit rating agencies and it is no assurance for guarantee to act.