Junk bonds typically have an interest rate of between 3 and 5 percent more than AAA-rated long-term debt.

Question

Quizplus · Accepted Answer

This is generally true. Junk bonds, also known as high-yield bonds, carry a higher risk of default compared to AAA-rated long-term debt. As a result, investors demand a higher return on their investment, resulting in a higher interest rate. The difference in interest rates between junk bonds and AAA-rated bonds can vary and is influenced by factors such as market conditions, credit ratings, and the financial health of the issuing company. However, a difference of 3 to 5 percent is a common range.

Junk Bonds Typically Have an Interest Rate of Between 3