Typical Individuals Have Difficulty Judging the Default Risk of Any

question 22

Multiple Choice

Typical individuals have difficulty judging the default risk of any one company,let alone the thousands of firms that sell bonds in a developed economy.To address this problem,

• A) the price of bonds increases as more information is made available to investors.
• B) borrowing entities rate their own bonds.
• C) individuals should never invest in bonds.
• D) the government assigns ratings of borrowing entities.
• E) private rating agencies evaluate and then grade the default risk of borrowing entities.

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Definitions:

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