Understanding Credit Ratings in Fixed Income

Investors often rely on credit ratings as an essential tool to assess the default risk associated with fixed income securities. These ratings are assigned by credit rating agencies that evaluate the creditworthiness of issuers and their debt securities. A rating can impact the interest rate that issuers pay to borrow. However, understanding the nuances of these ratings is crucial for investors. Consider the following statements regarding credit ratings and determine which of the following is accurate: