Which Moody's rating indicates a speculative bond?

The correct answer is tied to the classification of bond ratings as determined by credit rating agencies like Moody's. In Moody’s rating system, bonds are rated based on their credit quality, with AAA indicating the highest quality and lowest risk. As we move down the rating scale, bonds are considered to be of lower quality and increased risk.

The rating BA specifically falls into the speculative category. This means that bonds rated BA are seen as having some speculative characteristics, generally indicative of a higher probability of default when compared to investment-grade ratings. These ratings typically indicate a heightened level of risk for investors, suggesting that the issuer may face challenges in meeting debt obligations.

In contrast, ratings such as AAA, AA, and BAA represent investment-grade bonds, which are considered to have a lower risk of default. AAA is the highest quality, followed by AA, and BAA, which is still considered a lower-tier investment-grade rating but does not enter the speculative territory. Therefore, understanding the distinctions in these ratings is essential for evaluating the risk associated with various bonds in the market.