Beta Insurance Company is only allowed to invest in investment grade bonds.
To maximize the interest income, Beta Insurance Company should invest in bonds with which of the following ratings?
A . AAA
B . AA
C . A
D . B
Answer: C
Explanation:
Beta Insurance Company, which can only invest in investment-grade bonds, should invest in bonds with an "A" rating to maximize interest income. Investment-grade bonds are rated from AAA to BBB. While
AAA bonds offer the highest credit quality, they also offer the lowest yield. Bonds rated A offer a good balance between credit quality and higher interest income compared to AAA and AA bonds.
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