What Is A Junk Bond?

What Is A Junk Bond?

1 Answer

  1. According to the definition: Junk bonds are bonds that carry a higher risk of default than most bonds issued by corporations and governments. Their credit ratings are less than pristine, making it difficult for them to acquire capital at an inexpensive cost.
    Generally speaking, junk bonds are the normal bonds only but has some special facts attached to it like high risk and high yield. this kind of security is typically issued by a company seeking to raise capital quickly in order to finance a takeover. Junk bonds have a high default risk, they are speculative. Default risk is the chance that a company or government will be unable to pay its obligations when the bonds mature. Defaults on bonds most often occur within the first several years of a bond’s issue.

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