Which is an example of a Medium Grade Bond?

Which is an example of a Medium Grade Bond?

• A. Aa1 or Aa or AA
• B. Baa1 or Baa or BBB+ or BBB
• C. Aaa
• D. BBB-

Answer: (B)

Credit ratings reflect credit risk and separate bonds into tiers. Medium-grade bonds sit in the middle of the investment-grade spectrum: not the safest, but still considered investable. In Moody’s system, Baa1 and Baa are in this middle tier, while in the S&P/Fitch system, BBB+ and BBB occupy the same middle range. So the ratings Baa1, Baa, BBB+, and BBB are all examples of medium-grade bonds. The other options represent higher-quality grades (Aaa, Aa, AA) or the lowest end of investment grade (BBB-), which aren’t medium-grade.

Credit ratings reflect credit risk and separate bonds into tiers. Medium-grade bonds sit in the middle of the investment-grade spectrum: not the safest, but still considered investable. In Moody’s system, Baa1 and Baa are in this middle tier, while in the S&P/Fitch system, BBB+ and BBB occupy the same middle range. So the ratings Baa1, Baa, BBB+, and BBB are all examples of medium-grade bonds. The other options represent higher-quality grades (Aaa, Aa, AA) or the lowest end of investment grade (BBB-), which aren’t medium-grade.