1. Credit Ratings
Now credit ratings are done by a number of different credit rating agencies,
which you may have heard of, like Moody's, S&P, Fitch, or DBRS. Each
of these rating agencies rates different types of corporate debt, and they
each have their own system in order to rate the debt.
Now, we could simplify these ratings by putting a line right down the
middle of the ratings, and divide it into investment grade debt on the
top, which would be low risk, low return and also low fees.
Now, on the bottom, we would have non investment grade debt,
or high yield debt, as it's often called, higher risk, higher return and
higher fees.
2. Let's practice!