Why is CCC bond rating higher than AA bond rating?



1
the result is 10%, how they found it.

1 Answer(s)


1

Both CCC and AA are bond ratings that are awarded by rating agencies to bonds.

CCC rated bonds are more riskier than AA rated bonds and hence will need to pay a higher rate of interest than 6%. This extra interest rate that is paid by the CCC bonds compensate for the extra risk the investor takes.

This does not guarantee that the bond will be paid back full. There are still risks that the company may go bankrupt or miss its interest payments.