(a) Explain the purpose of a credit rating on a corporate debt issue. In your an
ID: 2660140 • Letter: #
Question
(a) Explain the purpose of a credit rating on a corporate debt issue. In your answer, discuss the importance of a credit rating on an international capital markets debt issue from the perspective of both a borrower and an investor. (20 marks)
(b) As a finance researcher at a leading university you are interested in risk premium applied by the markets on corporate debt issues. Is it inevitable that the risk premium will be constant throughout the maturity spectrum? Explain your response. (20 marks)
Explanation / Answer
A credit rating agency (CRA, also called a Ratings Service) is a company that assigns credit ratings
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