Question

In most cases a paragraph or so for each question will be sufficient. For problems, show your work such as calculator inputs and outputs for full credit.

Companies pay rating agencies such as Moody's and S&P to rate their bonds, and the costs can be substantial. However, companies are not required to have their bonds rated in the first place; doing so is strictly voluntary. Why do you think they do it?

Answer 1

Companies focus on rating their bonds because, it provide a sense of trust among investors for that bond due to which the cost of such bonds will significanly reduce due to higher rating. If the bonds is unrated, it is difficlut to sell among majority of investors and also the cost of bond will increase.

Moreover there are regulations in each countries that prohibits large investors to invest in such bonds. Hence due to all these factors its better for a company to get their bonds rated from a rating agency.