Because they combine high yield and high risk, junk bonds

Question

Quizplus · Accepted Answer

Junk bonds can provide a higher yield than investment-grade bonds, but they also come with a higher risk of default. However, including a small portion of high-yield bonds in a portfolio of mostly stocks and investment-grade bonds can increase the overall yield without significantly increasing the overall risk. Therefore, junk bonds may be considered as a way to balance risk and reward in a diversified portfolio. Option A is incorrect because while junk bonds are riskier, they can still be considered sound investment choices in the right portfolio. Option C is incorrect as all types of investors can choose to invest in junk bonds depending on their investment goals and risk tolerance.

Because They Combine High Yield and High Risk, Junk Bonds