To maximize the interest income, Beta Insurance Company should invest in bonds with which of the following ratings?

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

View Answer

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.