Final answer:
The credit rating assigned to a bond reflects the probability of defaulting on payments and indicates the issuer's creditworthiness. Higher credit ratings imply lower probabilities of default. Changes in interest rates can affect the bond's market price, making it more or less than $10,000.
Step-by-step explanation:
The credit rating assigned to a bond reflects the probability that the borrower will default on the payments. It provides an indication of the issuer's creditworthiness, or the likelihood of it being able to fulfill its financial obligations.
For example, if a bond has a high credit rating, such as AAA, it means that the issuer has a very low probability of defaulting on its payments. On the other hand, if a bond has a low credit rating, such as BB, it indicates a higher risk of default.
In terms of the bond's value, changes in interest rates can affect its market price. When interest rates rise, the value of existing bonds with fixed interest rates decreases because investors can earn higher returns elsewhere. As a result, the bond's price would be expected to be less than $10,000. Conversely, if interest rates decrease, the bond's price would be expected to increase.