Question

1. What are considered investment-grade bond ratings according to Moody's and Standard & Poor's? ( 10 points )

Answer 1

Standard & Poor's company is American credit rating agency. Its considered in big 3 credit rating agencies.

Company issues credit ratings of various company's debts. The ratings on scale of AAA to D.

For long term credit ratings, following ratings are considered investment grade

1. AAA considered to be the strongest capacity to meet the financial commitments.
2. AA considered to be very strong capacity to meet the financial commitments.
3. A is considered strong capacity to meet financial commitments but investing in A rated bond is little risky as compared to AAA rating bond as there is risk due to adverse changes in economic conditions.
4. BBB is rated obligatory company is having adequate capacity to meet financial commitments but there are more chances of weakening of capacity to meet financial obligations due to adverse change in economic conditions

The grades below BBB (BB, B, CCC, CC, C) are considered to be Non investment grades which are speculative and considered risky considering their capacity to meet the financial obligation. The grades like R(Under regulatory supervision), SD & D( defaulted on the obligation) & NR ( not rated) are also considered as non investment grade.