Unit ko samjho · NISM Series III-A
SEBI (Credit Rating Agencies) Regulations, 1999
4 questions is unit mein
Sawaal aur jawaab English mein hain, kyunki NISM ka exam paper bhi English mein hota hai.
Is unit mein kya hai
- What does a credit rating primarily express about a rated debt obligation?
- An investor treats a high bond rating as proof that the bond cannot suffer a market-price loss when interest rates rise. What is wrong?
- A rated issuer’s repayment capacity materially weakens after the initial rating. What should the rating agency’s process provide for?
- Two agencies assign different ratings to the same debt instrument. Does that difference alone prove that one agency committed fraud?
Zaroori ideas
Practice bank se · 1
What does a credit rating primarily express about a rated debt obligation?
A credit rating expresses an opinion about the likelihood of full and timely repayment of the rated debt obligation. Remember: A credit rating addresses credit risk rather than guaranteeing an investment outcome.
Hint Common mistake: Treating a high rating as protection against every type of loss. Focus on the promise made by a borrower to its lenders.
III-A-140Practice bank se · 2
An investor treats a high bond rating as proof that the bond cannot suffer a market-price loss when interest rates rise. What is wrong?
A credit rating does not remove interest-rate or secondary-market price risk. Remember: Strong credit quality does not make a bond immune to market-price changes.
Hint Common mistake: Confusing low default risk with the absence of all investment risk. Separate the chance of repayment default from changes in market valuation.
III-A-141Practice bank se · 3
A rated issuer’s repayment capacity materially weakens after the initial rating. What should the rating agency’s process provide for?
The agency should monitor developments and review the rating when relevant changes affect creditworthiness. Remember: Credit ratings need surveillance as the issuer’s ability to repay changes.
Hint Common mistake: Treating the initial rating as permanent until the debt matures. Consider whether a rating is a one-time event or an ongoing assessment.
III-A-142Practice bank se · 4
Two agencies assign different ratings to the same debt instrument. Does that difference alone prove that one agency committed fraud?
A difference alone does not prove fraud because agencies may apply different methodologies and professional judgments. Remember: Assess the methodology and evidence before treating a rating difference as wrongdoing.
Hint Common mistake: Assuming the higher rating is necessarily correct or the lower one dishonest. Distinguish a difference of professional opinion from evidence of misconduct.
III-A-143