the higher the debt rating, the greater the risk of default on a financial obligation

Expert Solution

The statement is false as higher debt ratings are assigned to firms having good financials and lower risk of default. The risk rating is done by credit rating agencies like Moods , S&P, CARE etc which does a financial due diligence to provide right information to the end investors (ie Bond investors). Rating are assigned from a scale of AAA to D where AAA is the highest rating assigned to the most credit worthy firms. Higher the rating lower the risk , hence lower the coupon rate on the bonds.

jeff jeffy answered 2 years ago

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