Individual Bond Ratings

FIN/420

Bond Ratings

People who are looking for a way to earn money investing while having a reasonably liquid position look into purchasing bonds. Bonds are debt securities issued by different agencies to which earn interest. Investors must conduct the proper research before acquiring bonds. The internet takes some of the hard work out of the examining individual entities and their ratings.

Internet Bond Information

The internet has become a mass hub that virtually connects people all over the world with information, products or services that they are looking for. The University of Phoenix Library has an extensive database which can equip people with the tools needed to understand the bond rating system. The library provided information about the composition of bonds, what agencies typically sell bonds to investors, the history of bonds, and what they are used for. There are also peer-reviewed articles that explain different positions of bonds from investors standpoints.

Bond Rating Explanation

The Britannica Academy (2018) explains, “bond ratings are grades given to bonds by the creditworthiness of the government, municipality, or corporation issuing them” (para 4). Several bond rating companies gather quantifiable and qualitative information and categorize an agency’s default risk. Standard and Poor (S&P) is one of the most know credit rating companies. AAA S&P ratings are the highest level, which indicates default risk is low, but interest rates are typically smaller. BBB Standard and Poor ratings have a medium risk. B rated companies usually can meet their financial obligations but have a higher risk. C ratings are the worst rating and have the highest level of risk and may represent companies that are bankrupt.

How I Will Use This Information

Bonds are interesting to me for a few reasons. I like that fact that they can be sold and more liquid than other securities. Depending on that risk that I am willing to take on, the interest rates on bonds can give better yields than different types of investments. Additionally, having this information will help me make a better decision when choosing which entity to invest.

Conclusion

The tools used to understand bonds are helpful to any investor. Learning how to interpret a company’s risk is essential if someone wants to ensure a return. Depending on the amount of risk an investor wants to take, you may be able to invest in less popular bonds. The internet is an excellent source of information for bond rating information.

References

Bond. (2018). Retrieved from https://academic-eb-com.contentproxy.phoenix.edu/levels/collegiate/article/bond/80569#