Financial Awareness - Risk, Stability & Emerging Finance
Which of the following is TRUE regarding the credit rating of corporate debt instruments?
Which of the following is TRUE regarding the credit rating of corporate debt instruments?
medium Q8 of 15
Step-by-Step Solution
Step 1: Understand credit rating purpose
Credit ratings provide an independent assessment of the creditworthiness and default risk of debt instruments, helping investors make informed decisions.Step 2: Analyze other options
Credit rating agencies are independent entities, not appointed by RBI; higher rating means lower risk; credit rating is mandatory for many corporate debt issues, not only government securities.Final Answer:
Credit ratings help investors assess the risk of debt instruments → Option BQuick Check:
Credit rating purpose = assess risk for investors ✅
Quick Trick: Higher rating = lower risk
Common Mistakes:
- Confusing credit rating agency roles and rating implications
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