Final answer:
Moody's rates investment grade bonds based on the creditworthiness of the issuer using letter grades ranging from Aaa to C. Investment grade bonds are typically rated Baa3 or higher.
Step-by-step explanation:
Moody's rates investment grade bonds based on the creditworthiness of the issuer. They assign letter grades ranging from Aaa (highest) to C (lowest) to indicate the level of risk associated with the bond. Investment grade bonds are typically rated Baa3 or higher, while bonds with a rating below Baa3 are considered speculative or junk bonds.
For example, if a company receives an Aa1 rating from Moody's, it means the company has a very low risk of defaulting on its bond payments. On the other hand, a bond with a lower rating like Ba2 would indicate a higher risk of default.
Moody's rating of investment grade bonds helps investors make informed decisions about the creditworthiness and risk associated with different bonds.