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      Question

      A bond is considered investment grade if its credit

      rating is ________ by Standard & Poor's or _________by Moody's.
      A BBB or higher, Baa3 or higher Correct Answer Incorrect Answer
      B BBB+ or higher, Baa2 or higher Correct Answer Incorrect Answer
      C BBB- or higher, Baa3 or higher Correct Answer Incorrect Answer
      D BBB- or higher, Bba3 or higher Correct Answer Incorrect Answer
      E BBB or higher, Baa2 or higher Correct Answer Incorrect Answer

      Solution

      A bond is considered investment grade or IG if its credit rating is BBB- or higher by Standard & Poor's or Baa3 or higher by Moody's. Generally they are bonds that are judged by the rating agency as likely enough to meet payment obligations that banks are allowed to invest in them. Bonds of on-investment grades are called junk bonds and they offer higher yield.

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