The price of a bond issue is determined by the market or effective rate of interest.A bond issue with a 8% stated interest rate will sell for less than face value if the market or effective rate of interest is 10%.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.
Definitions:
Government Activity
Actions and operations undertaken by the government to fulfill its various roles, such as providing public services, regulating industries, and ensuring economic stability.
Redistribution Income
The transfer of income and wealth from some individuals to others through a social mechanism such as taxation, charity, welfare, public services, or land reform.
Rent-seeking Activity
Actions by individuals or firms to increase their own wealth without creating new wealth or value for society.
Taxing
The act of imposing charges on individuals or entities by the government in order to finance public spending and services.
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