Medium Grade bonds are what type of bond?

Medium Grade bonds are what type of bond?

• A. Low Grade
• B. Medium Grade
• C. Speculative Grade
• D. High Grade

Answer: (B)

Credit quality categories label bonds by their default risk, and the term middle grade sits right in the middle of that spectrum. Medium-grade bonds carry a moderate level of credit risk — not as safe as high-grade, investment-quality bonds, but not as risky as speculative (junk) bonds. Because of this intermediate risk, they usually offer yields higher than the safest bonds to compensate investors for the added risk, yet lower than what is seen with the riskiest bonds. The other descriptors describe the extremes—low grade means higher risk, speculative grade means high risk, and high grade means the lowest risk—so medium grade is the balanced, middle option.

Credit quality categories label bonds by their default risk, and the term middle grade sits right in the middle of that spectrum. Medium-grade bonds carry a moderate level of credit risk — not as safe as high-grade, investment-quality bonds, but not as risky as speculative (junk) bonds. Because of this intermediate risk, they usually offer yields higher than the safest bonds to compensate investors for the added risk, yet lower than what is seen with the riskiest bonds. The other descriptors describe the extremes—low grade means higher risk, speculative grade means high risk, and high grade means the lowest risk—so medium grade is the balanced, middle option.