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What are bond ratings and why are they assigned? Bonds are like loans the issuers get from investors. Just as your credit worthiness is evaluated when you apply for a loan, the credit worthiness of the bond also needs to be evaluated. To do this, independent agencies have created a rating system. To help investors evaluate bonds, private rating agencies such as Moody's and Standard & Poor's assign grades to designate a bond's quality. Which of the following statements regarding the rating system are correct? Check all that apply A bond rated Ba by Moody's is comparable to a bord rated BB by Standard & Poor's Different rating systems are used for corporate versus municipal bonds Once a bond receives a rating, it cannot be changed The average yields on Asa bands are generally lower than the average yields on Boa bonds The rating signifies a lower risk of default than a Broting The following chart shows the distribution of Moody's ratings for municipal bonds between 1970 and 2000 PERCENTAGE OF DONOS IN THIS CATEGORY 5662 29 The following chart shows the distribution of Moody's ratings for municipal bonds between 1970 and 2000. PERCENTAGE OF BONDS IN THIS CATEGORY 60 54.42% 50 40 29.97% 30 20 11.51% 10 3.15% 0.80% 0.13% 0.02% 0 Aaa ABA Bas Ba MOODY'S RATING You can see that of municipal bonds were considered junk bonds during this period 40 29.97% 30 99.05% 20 0.15% 10 0.02% 3.15 14.66% 0.80% 0.13% 0.02% 0 Aaa Baa Ba 0.95% B Caa-C MOODY'S RATING 3.15% 69.08% You can see that of municipal bonds were considered junk bonds during