Explain the different types of financial ratings

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Explain the different types of financial ratings. Explain their usefulness to investors and banks, as well as the impact for bond issuers and/or companies taking out loans.

Explain the usefulness of a mandatory rating for an investor and the resulting consequences for an issuer.

- Mandatory rating! (No need to describe the differences between internal and external internal ratings (rating agency)

- Usefulness: risk measurement; gives an assessment of the repayment capacity of the issuer

- Main consequence for the issuer: determination of the risk profile for investors and therefore of the risk premium and therefore of the cost of financing of the issuing company.

- Another consequence: access to investors; some investors cannot finance companies with a rating below a certain threshold

Reference no: EM133116693

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