Question

In: Finance

A controversy erupted regarding bond- rating agencies when some agencies began to provide unsolicited bond ratings....

A controversy erupted regarding bond- rating agencies when some agencies began to provide unsolicited bond ratings. Why do you think this is controversial? Additionally, around the time that real estate began to drop sharply the rating agencies again came under fire as nearly all real estate back bonds were rated triple A. Can anyone find more information on this controversy?

Solutions

Expert Solution

Unsolicited Bond rating are issued by the bond rating without getting in touch with the the bond issuer and they will be providing with this bond ratings voluntarily and they may be unfavourable to the bond issued and that can be controversial in nature because those bond issuer will be feeling that they are not properly aware of the situation of the company and they have issued these ratings out of no proportion.

This is controversial because this is mostly unfavourable to the bond issuer and he will be trying to not agree with these unsolicited Bond ratings because the bond rating company has not been in touch with the bond issuer and hence this bond issuer will feel that the bond have not been adequately rated.

these real estate bonds are related to financial crisis of 2008 when Bond rating companies have been issuing them with high credit ratings even if they are sub standard properties and sub standard assets so these Bond rating company have not been efficiently valuing real estate sector and they have been accused of misapportionment.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

A controversy erupted regarding bond- rating agencies when some agencies began to provide unsolicited bond ratings....
A controversy erupted regarding bond- rating agencies when some agencies began to provide unsolicited bond ratings. Why do you think this is controversial? Additionally, around the time that real estate began to drop sharply the rating agencies again came under fire as nearly all real estate back bonds were rated triple A. Can anyone find more information on this controversy?
One of the bond rating agencies ran into controversy when it began rating bonds of some...
One of the bond rating agencies ran into controversy when it began rating bonds of some companies without their approval. Many of the companies whose bonds were rated in this manner were upset by this. Why do you think a company would be unhappy to receive a "free" bond rating?
4. One of the bond rating agencies ran into controversy when it began rating bonds of...
4. One of the bond rating agencies ran into controversy when it began rating bonds of some companies without their approval. Many of the companies whose bonds were rated in this manner were upset by this. Why do you think a company would be unhappy to receive a "free" bond rating
Suppose the credit rating agencies have upgraded the ratings of a bond issued by XYZ Inc....
Suppose the credit rating agencies have upgraded the ratings of a bond issued by XYZ Inc. from speculative grade to investment grade. What effect will it have on the secondary market for this bond? What will happen to price and YTM? Use a secondary market diagram to explain your answer
Suppose the credit rating agencies has upgraded the ratings of a bond issued by ABC Inc....
Suppose the credit rating agencies has upgraded the ratings of a bond issued by ABC Inc. from speculative grade to investment grade. What effect will it have on the secondary market for this bond? What will happen to price and YTM? Use a secondary market diagram to explain your answer.
8.         Bond Ratings [LO3] Companies pay rating agencies such as Moody’s and S&P to rate their bonds,...
8.         Bond Ratings [LO3] Companies pay rating agencies such as Moody’s and S&P to rate their bonds, and the costs can be substantial. However, companies are not required to have their bonds rated; doing so is strictly voluntary. Why do you think they do it?
What are the three major rating agencies? What are some criteria that the rating agencies use...
What are the three major rating agencies? What are some criteria that the rating agencies use when assigning ratings? What impact do bond ratings have on the cost of debt to the issuing firm?
A controversy erupted in 2009 when images of the Rorschach test (a personality test) cards were...
A controversy erupted in 2009 when images of the Rorschach test (a personality test) cards were posted on the Internet website Wikipedia, including information about common responses to each inkblot. Discuss whether information regarding psychological tests like the Rorschach should be kept secret or released to the public. Consider these questions: If you keep the details of psychological tests secret does it prevent the general public from questioning their validity? Do psychologists have an obligation to be transparent whenever possible?...
(1) What are credit ratings? (2) Credit rating agencies such as Moody’s and Standard & Poor’s...
(1) What are credit ratings? (2) Credit rating agencies such as Moody’s and Standard & Poor’s use several factors to determine a company’s credit rating. Please list any three factors that can play a role in determining a company’s credit rating. (3) Compared to companies with a poor credit rating such as D, companies with good credit ratings such as AA or AAA have to pay higher or lower interest to borrow money? Explain your answer.
You are a newly hired analyst at one of the leading bond rating agencies, Standard and...
You are a newly hired analyst at one of the leading bond rating agencies, Standard and Poor’s. The first day on the job you are asked to rate the following bonds: a. The bonds of an Internet start-up company b. The bonds of a country with a history of inflation and political instability c. The bonds of company operating a network of toll highways d. The bonds of a company with a long illustrious history that has fallen on hard...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT