Conflicts of Interest May Arise Within the Credit Rating Agencies

question 2

Multiple Choice

Conflicts of interest may arise within the credit rating agencies because

• A)the investors pay the credit agencies for ratings.
• B)the issuers of debt securities pay the credit agencies for ratings.
• C)the credit rating agencies provide auditing services to issuers of debt securities.
• D)the credit rating agencies are involved in offering credit counseling to investors.

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Definitions:

Self-Interest

The consideration of one's own advantages or benefits in making decisions or taking actions.

Gather

To collect or bring things together from different places or over a period.

Process Information

The act of receiving, interpreting, and understanding information, essential in decision-making and learning.

Self-Disclosing

The act of revealing personal information to others in order to foster trust and openness in relationships.