Economics Bonds Questions
The role of bond ratings in the bond market is to provide investors with an assessment of the creditworthiness and risk associated with a particular bond issuer. Bond ratings are assigned by credit rating agencies and indicate the likelihood of the issuer defaulting on their bond payments. These ratings help investors make informed decisions by providing an objective measure of the issuer's financial stability and ability to meet their debt obligations. Higher-rated bonds are generally considered less risky and therefore offer lower interest rates, while lower-rated bonds are considered riskier and offer higher interest rates to compensate for the increased risk.