Bond ratings

Question 1

The term high-yield bond would apply to a bond with a Moody’s rating of

A)
Baa.
B)
BB.
C)
Ba.
D)
BBB.

Answer 1

C) Ba

Explanation
High-yield bonds are those whose ratings fall below investment grade. Investment grade is the top four. Using Moody’s descriptions, ratings run from Aaa to Aa to A to Baa to Ba to B and then below. The first rating below the top four is Ba. That is equivalent to a BB rating from Standard & Poor’s (but the question asks specifically about Moody’s).

LO 4.f

Question 2

T/F: A rating of BBB is the lowest investment-grade rating assigned by S&P.

Answer 2

True