Asked by Maria Rodarte on May 01, 2024
Verified
Which of the following risks do debt ratings specifically measure?
A) Interest Rate Risk
B) Maturity Risk
C) Default Risk
D) Both b & c
E) All of the above
Debt Ratings
Assessments provided by rating agencies that evaluate the creditworthiness of debt issuers and their financial instruments.
Default Risk
Default risk is the chance that a borrower will be unable to make the required payments on their debt obligations.
Interest Rate Risk
The risk of loss to an investor from changes in the price of a bond that arise from changes in the market interest rate. Also called price risk and maturity risk.
- Understand the implications of debt ratings on the risk analysis of bonds.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
C
Explanation :
Debt ratings specifically measure the default risk, which is the risk that the issuer will not be able to make the promised payments on time. Interest rate risk and maturity risk are different types of risks that are not directly measured by debt ratings.
Learning Objectives
- Understand the implications of debt ratings on the risk analysis of bonds.