Private Rating Agencies Evaluate and Then Grade the Default Risk

question 98

Multiple Choice

Private rating agencies evaluate and then grade the default risk of bonds to address which of the following problems?

• A) the government's inability to judge default risks
• B) companies hiding their finances
• C) bondholders not having access to companies' finances
• D) individuals' inability to easily judge default risks
• E) too many investors picking risky bonds for their portfolios

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Definitions:

Fiscal Policy

Government policies related to revenue generation (taxation) and expenditure to influence the economy.

Monetary Policy

The process by which a country's central bank controls the supply of money, often targeting inflation or interest rates to ensure economic stability.

Federal Reserve Bank

The central banking system of the United States, responsible for monetary policy, regulation of banks, and providing financial services.

Gross Domestic Product

The aggregate value of all products and services finished within a nation's boundaries over a distinct timeframe, measured in monetary or market terms.