Final answer:
The bond with the lowest exposure to credit risk is likely the A rated general obligation municipal bond. This type of bond is backed by the issuing municipality's taxing power, offering more security than corporate bonds or less creditworthy municipal bonds.
Step-by-step explanation:
Among the options given, a A rated general obligation municipal bond is likely to have the lowest degree of exposure to credit risk. General obligation bonds are issued by municipal entities and have the full faith and credit of the issuing municipality. This means they are backed by the issuer's taxing power, which makes them more secure in terms of credit risk compared to corporate bonds or lower-rated municipal revenue bonds that rely on revenue from specific projects to pay bondholders.
Moody's, an independent firm, assigns ratings such as Baa, Aa, etc., reflecting the creditworthiness of the bonds' issuers. Higher-rated bonds, like A-rated bonds, generally indicate lower credit risk compared to Ba or Baa rated bonds. Bonds issued by the federal government typically have the lowest credit risk, but between municipal and corporate bonds, higher ratings are preferable for investors looking to avoid principal loss.