Which of the Following Statements About Bond Rating Agencies Is

question 30

Multiple Choice

Which of the following statements about bond rating agencies is true?

• A) Bonds are rated by an agency of the federal government.
• B) Bonds rated AAA are guaranteed by the company that issues the rating.
• C) During the financial crisis of 2007-2009 it became clear that rating agencies severely underestimated the risks of some issues.
• D) Bond rating agencies are paid by investors and receive no compensation from the bonds' issuer.

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Definitions:

Diminishing

The process of lessening or decreasing in size, importance, or intensity.

Output

The quantity of goods or services produced by a business, individual, machine, or industry over a specified period.

Marginal Costs

Marginal costs refer to the increase or decrease in the total cost of producing one more unit of a good or service.

Marginal Productivity

The additional output that results from employing one more unit of input, such as labor or capital, while keeping other inputs constant.