Agencies Exist Which Rate Bonds Based on Characteristics of the Borrower

question 49

Multiple Choice

Agencies exist which rate bonds based on characteristics of the borrower. Such bond rating agencies are an example of a financial market response designed to:

• A) increase information asymmetry.
• B) decrease the real return to bondholders.
• C) provide a lower cost solution to the high cost of information.
• D) transfer risk from the buyer to the rating agency.

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Definitions:

Intellectual Disability

A situation marked by considerable deficits in both cognitive capabilities and adaptive actions, including a spectrum of daily life social and practical proficiencies.

Adaptive Abilities

The capability of individuals or species to adjust or change in response to new or altered environmental conditions.

Profound

Having deep insight or understanding; extremely meaningful or significant.

Moderate

Refers to being within reasonable limits; not excessive or extreme.