When at least two-thirds of a bond mutual fund's portfolio consists of bonds rated below Baa by Moody's or BBB by Standard and Poor's, the fund is called a ____ fund.
A) Growth
B) capital appreciation
C) junk bond
D) leveraged bond
E) none of the above

Question

Quizplus · Accepted Answer

A junk bond fund invests primarily in high-yield or non-investment grade bonds, which are rated below Baa by Moody's or BBB by Standard and Poor's. This type of fund carries a higher risk compared to investment-grade bond funds, but also provides higher potential returns.

When at Least Two-Thirds of a Bond Mutual Fund's Portfolio