Bonds and Debt Instruments
Bonds
Bonds are notes that have two attached promises
- They promise to pay a certain amount of interest.
- They promise to return principle on return.
The maturity of bonds can vary to very short (1 year), to long (30 years). In some cases bonds have been known to go over a century!
Ratings
Bonds are rated by several standards. The most popular are Standard & Poor and Moody. They are given letter grades similar to a report card, but with multiple letters in place of +/-. These ratings break bonds into two groups, investment grade and junk bonds as shown to the right:
|
| Rating |
Category |
| AAA |
Investment Grade |
| AA |
|
| A |
|
| BBB |
|
| BB |
Junk |
| B |
|
| CCC |
|
| CC |
|
| C |
|
| DDD |
|
| DD |
|
| D |
|
|
Bonds & Debt Instruments continued>
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