Bond Rating
Rating agencies grade bonds on a letter scale that indicates credit worthiness and risk. In simplest terms, the lower the letter scale, the lower the quality and the higher risk potential: AAA or triple A rating — indicates the highest-quality bonds that offer the highest protection for principal and interest payments; A or single A rating — indicates good to medium-grade bonds; BBB or triple B rating — indicates medium-grade quality bonds, with adequate protection; Below triple B is considered speculative, high-risk securities and the category is referred to as junk bonds.
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