The Price of a Bond Issue Is Determined by the Market

question 3

Essay

The price of a bond issue is determined by the market or effective rate of interest. A bond issue with a 10% stated interest rate will sell for less than face value if the market or effective rate of interest is 12%. The creditworthiness of the issuing entity is one of the factors that influence the market rate for a specific bond issue. Investors rely heavily on bond ratings provided by Standard & Poor's Corporation and by Moody's Investors Service, Inc.
Required:
Complete the table below by entering the appropriate rating for each level of risk under the S&P and Moody's rating systems.

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Definitions:

Bailee's Lien

A right that allows a bailee (a person who temporarily holds property for another) to retain possession of the property until payment is made.

Right To Sell

The legal authority granted to an individual or entity to sell a particular product, property, or service.

Bailor

An individual or entity that entrusts possession of goods or property to another (the bailee) under an agreement.

Bailment

A legal relationship in common law where physical possession of personal property, or a chattel, is transferred from one person to another who subsequently has possession of the property.