Rating

DEFINITION of 'Rating'

1. An evaluation of a corporate or municipal bond's relative safety from an investment standpoint. Basically, it scrutinizes the issuer's ability to repay principal and make interest payments.

2. An analyst's recommendation on whether to buy, sell or hold a specific stock.

BREAKING DOWN 'Rating'

Bonds are rated by various organizations such as S&P and Moody's. Ratings range from AAA or Aaa (the highest), to C or D, which represents a company that has already defaulted.

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  3. How do the returns on municipal bonds compare to those of other bonds?

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  4. In the context of a bond, what does the principal refer to?

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  5. Does a good credit rating guarantee repayment?

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