Question

Do some research on bond rating companies such as Moody's and Standard and Poor.

Answer 1

The main purpose of bond rating agencies is to assign credit ratings to the bonds to determine the quality of the bonds and the probability of default.

These ratings helps the investors determine weather on which bonds they should be investing their hard earned money on as these ratings help determine the creditworthiness of the bonds and the issuer.

There are rating agencies called Moody's and Standard and Poor and Fitch ratings, three major rating agencies in the US.

Standard and Poor's highest rating is AAA - once a bond falls to BB+ status, it is no longer considered investment grade. The lowest rating, D, indicates that the bond is in default, that is, the issuer is delinquent in making interest payments and principal repayments to its bondholders. In general, Moody's assigns bond credit ratings of Aaa, Aa, A, Baa, Ba, B, Caa , Ca, C to the bonds.

Bonds ratings keep changing, depending upon the current market conditions , these ratings agencies frequently change the ratings and upgrade or downgrade the bonds depending upon the current scenario. It is important to inform the investors about the ratings tat have been changes as it is o only important for the investors but it also determines the interest rate on these bonds.

Standard and poor and Moody's are private firm that sell ratings for publishing in the newspaper.