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:

Budgeted Purchases

The projected amount of goods or services a business plans to buy over a certain period, usually as part of its budgeting process.

Budgeted Sales

The projected amount of sales, in units or monetary terms, as planned for a future period.

Sales Forecast

A projection of future sales revenue, often based on historical sales data, market trends, and economic conditions.

Growth

Refers to the increase in size, value, or importance of an entity over time.