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Bonds Videos 389 videos

Finance: What is Collateralized Mortgage Obligation (CMO)?
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What is Collateralized Mortgage Obligation (CMO)? A CMO is a mortgage bond that consists of a large number of different individual mortgages bundle...

Finance: What are Kickbacks?
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What are kickbacks? Well, they're things we don't get for working at Shmoop, that's for sure. Hit play to find out more.

Finance: What are At the Money, In the Money, Deep in the Money, and Out of the Money?
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What are At the Money, In the Money, Deep in the Money, and Out of the Money? At the money happens when a stock is trading at an option’s strike...

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Finance: What is Investment Grade? 2 Views


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Description:

"Investment grade" indicates the quality of an investment. If it's investment grade, it's, well...worth investing in. Highly rated, and not too risky.

Language:
English Language

Transcript

00:00

Finance allah shmoop what is investment grade Whoa whoa Really

00:08

steve Not not investment grade No Oh alright much better

00:13

This is investment grade Aren't enough of that Think about

00:17

the quality of investment in a bond as relating tow

00:20

How slippery the slope is on which investors are driving

00:25

their investment returns when you get way Steep like here

00:30

in the rocky mountains Well that's the land of c

00:33

and d rated bonds And you make a lot of

00:36

vertical progress As long as things don't go Ah arai

00:39

like vertical progress Like you get very high interest rates

00:42

for taking a lot of risk that these bonds go

00:45

bankrupt They're not investment grade so yeah And things go

00:49

awry Well you look like that guy All right So

00:52

here's the map for grades of bonds brought to you

00:54

courtesy of the kindly loving people at moody's and s

00:58

and p rating services And you can see the block

01:01

investment grade there from the three triple d minus there

01:06

on up Well all of these are investment grade Meaning

01:11

that at least historically the odds of any of these

01:14

bonds going bad I e they stopped paying interest payments

01:18

And investors don't collect well The odds of them failing

01:21

are very low The whole notion of being investment grade

01:25

means that the odds of getting your investment in the

01:28

bond back plus all the interest payments are really high

01:31

Their grade is for investors And with that certainty comes

01:36

thie quote penalty unquote of lower interest rates or investment

01:41

returns Because presumably in buying investment grade paper investors have

01:46

taken last risk so they get less reward right Yeah

01:50

and you know for those who eat risk for breakfast

01:53

you know the sky's the limit and not always in 00:01:56.657 --> [endTime] a good way No

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