Bond Ratings-54

Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds

by Robert Hashemian

Page 54

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

Bonds with BBB or higher grades are considered "investment grade" meaning that they have little risk of default, while the rest are labeled as "junk bonds" meaning a high risk of default. Grade "D" indicates that the bond is already in 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

Here, bonds with Baa or higher grades are considered "investment grade" while the rest are "junk bonds."

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 …

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Book Chapters

Table of Contents	Copyright and Disclaimer	Foreword	Money
Bonds	Futures	Stocks	Options
Mutual Funds	Retirement	Final Words	Appendix A