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• AAA — Highest quality
• AA — Very good quality
• A — Good quality
• BBB — Medium quality
• BB — Lower medium quality
• B — Poor quality
• C — Speculative quality
• D — Default

The grade categories assigned by Moody’s are:

• Aaa — Highest quality
• Aa — High quality
• A — Adequate quality
• Baa — Medium quality
• Ba — Speculative quality
• B — Low quality
• Caa — Poor quality
• Ca — Speculative quality
• C — No quality or default

As a general rule, junk bonds pay higher interests than investment grade bonds following the old rule of risk/reward ratio. So which types of bonds are suitable for you? That depends on your tolerance for risk. Remember that the risk/reward ratio plays an important role in …