True or False: Higher bond ratings typically indicate lower credit risk.

Higher bond ratings are assigned to bonds that are considered to have lower credit risk, meaning that the issuer is more likely to meet its debt obligations and repay investors. Rating agencies evaluate the creditworthiness of issuers based on various factors, including financial health, past repayment history, economic conditions, and the issuer’s ability to generate revenue.

As the bond ratings increase, it reflects a diminished likelihood of default on the financial obligations, which is a key indicator of credit risk. Investors often seek higher-rated bonds as they typically provide more security regarding the return of their principal and interest payments. Therefore, the statement that higher bond ratings typically indicate lower credit risk is indeed true.