CFA Level I · CFA Level I Exam · Credit Risk
An investment manager's policy restricts purchases to investment-grade bonds. Which rating most likely meets this requirement under the Moody's scale?
Baa3 meets the policy. On Moody's scale, investment grade covers Aaa through Baa3, and Ba1 and lower ratings such as B2 are non-investment grade. Baa3 is the lowest investment-grade rating, so it is the only qualifying choice among the options.
- ABa1
- BBaa3Correct
- CB2
Explanation
On the Moody's scale, investment grade runs from Aaa down to Baa3. Ba1 and below, including B2, are non-investment grade (high yield). Baa3 is the lowest investment-grade rating, so it is the only option that meets the policy.
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