A junk bond is a high risk, high yield debt instrument typically used to finance a leveraged buyout or a merger, or to provide financing to a company of questionable financial strength.

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Junk bonds typically have a lower credit rating and are considered higher risk than investment-grade bonds, but offer higher yields to compensate for the risk. They are often used to finance corporate acquisitions or restructurings, or to provide financing to companies in need of capital but with weak credit profiles.

A Junk Bond Is a High Risk, High Yield Debt