Series 7 Exam Question 24: Answer and Explanation

Question: 24

Arrange the following Moody's bond ratings in order from safest to riskiest.

I. Baa1

II. Aa2

III. A3

IV. Aa1

• A. I, IV, II, III
• B. I, IV, III, II
• C. IV, II, I, III
• D. IV, II, III, I

Correct Answer: D

Explanation:

D. Companies like Moody's, Standard & Poors, and Fitch provide the credit rating of debt securities. Since you are being asked to place these Moody's ratings in order from safest to riskiest, you have to look at the letters first. Out of the choices listed, Aa is higher than A, and Aa1, is higher than Aa2, so you know the order starts with Aa1 and then Aa2. Since A is higher than Baa, the order from highest to lowest is Aa1, Aa2, A3, and finally Baa1.