Final answer:
B. credit quality. The distinction between investment grade debt and non-investment grade debt is best described by differences in credit quality. Investment grade debt refers to bonds that have a low risk of default, while non-investment grade debt, also known as high-yield or junk bonds, have a higher risk of default.
Step-by-step explanation:
The distinction between investment grade debt and non-investment grade debt is best described by differences in credit quality. Investment grade debt refers to bonds that are considered to have a low risk of default, while non-investment grade debt, also known as high-yield or junk bonds, are considered to have a higher risk of default.
Credit rating agencies, such as Moody's and Standard & Poor's, assign ratings to bonds based on the issuer's creditworthiness. Bonds with a rating of AAA to BBB- are generally considered investment grade, while bonds with a rating below BBB- are considered non-investment grade.
Investment grade bonds tend to have lower interest rates because of their lower risk profile, while non-investment grade bonds offer higher interest rates to compensate investors for taking on higher risk.