Topic #5: Bond valuation and the structure of interest rates - Text Chapter 6

Case: Select any 2 major credit rating agencies.

Required:

1. a) Outline the differences in approaches / processes between the 2 firms when assessing a debt security rating.

2. b) Why is it generally critical for a bond issue to be rated at least investment-grade.

3. c) Outline some of the factors that may result in a credit rating agency changing the ratings allocated to a bond subsequent to its issue. Provide a practical example of such re-rating in relation to a bond issue.

Please use the concept of finance to explain this case.