ECONOMICS
MONEY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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He does not know anything about investment.
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Junk bonds can pay very high interest rates.
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Most junk bonds have low interest rates.
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Junk bonds have high bond ratings.
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Detailed explanation-1: -Bonds that are given a higher credit rating are considered investment-grade and are the most sought after by investors. Bonds with a low credit rating are known as non-investment grade or junk bonds. Due to the higher risk of default, they typically pay 4 to 6 points higher interest rates than investment-grade bonds.
Detailed explanation-2: -Sometimes also called junk bonds, these bonds offer higher interest rates to attract investors and compensate for the higher level of risk. Like other types of bonds, when you buy a high-yield bond, you’re lending money to the issuer.
Detailed explanation-3: -If the interest rate increases, the value of the bond will decrease. If it falls, the value conversely goes up, so this is a two-way street, there just is a much greater chance of this going the wrong way with a high-yield bond over a traditional investment-grade bond.
Detailed explanation-4: -Junk bonds are issued by companies with poorer credit quality. Bonds are characterized by their credit quality and fall into one of two bond categories: investment grade and non-investment grade. Non-investment-grade bonds, or high-yield bonds, carry lower credit ratings from the leading credit agencies.
Detailed explanation-5: -Investors looking for an absolutely sound place to put their money will buy them. Junk bonds are riskier. They will be rated BB or lower by Standard & Poor’s and Ba or lower by Moody’s. These lower-rated bonds pay a higher yield to investors.