\uff03K1137_.docx - I1 Issue 3 a Credit rating provide a debt security rating of different securities such as bonds and loans Security ratings indicates

uff03K1137_.docx - I1 Issue 3 a Credit rating provide a...

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I1 Issue # 3 a) Credit rating provide a debt security rating of different securities such as bonds and loans. Security ratings indicates the risk exposed on a security and would help investors to determine whether a security is an investment or a speculative. The investment securities have higher rates while speculative securities have lower rates. The market participants in Australia use the credit ratings determined by the credit companies to determine whether to “buy outright or go long” on higher rated securities. On the other hand, the lower rated securities help market participants to be speculative on the price movements of risk securities. Credit rating agencies assign values to various risk securities such as bonds and loans. Investment grade securities are rated AAA, AA, A and BBB while the speculative grade ratings are rated below BB. The big three are Moody’s, Standard and Poor’s (S&P) and Fitch Ratings. The investment quality in Moody’s rating ranges from Aaa to Baa and speculative

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