12 Questions
What is the primary purpose of a credit rating?
To evaluate the issuer's ability to repay loans
What is the typical range of an individual's credit score?
300 to 900
Which of the following is NOT a characteristic of credit rating mentioned in the text?
Provides a specific investment recommendation
What does a high credit rating imply about the borrower?
A strong likelihood of the borrower repaying the loan in full and on time
What is the significance of debt instruments rated below BB?
They are categorized as speculative or junk bonds
What is the main difference between credit ratings and credit scores?
Credit ratings are for businesses and governments, while credit scores are for individuals
What is the primary purpose of a credit rating?
To assess a borrower's creditworthiness and ability to repay debts
Which entities typically assign credit ratings?
Credit rating agencies like Standard & Poor's and Moody's
How are credit rating agencies compensated for their services?
They are compensated by the entity seeking the rating or the issuer of a debt instrument
What does a higher credit rating generally indicate?
Lower risk of default
Which of the following factors are typically considered when assigning a credit rating?
The borrower's financial performance, debt levels, and economic conditions
What is the primary purpose of credit ratings in the world of finance?
To help lenders and investors gauge the risk associated with lending or investing
Learn about the meaning of credit rating, which measures how likely a borrower is to repay their debts. Explore how credit rating agencies like Standard & Poor’s, Moody’s, and Fitch assess creditworthiness for individuals, companies, governments, and sovereign nations.
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