Junk bonds have yields that are considerably higher than those of the highest-rated bonds. They are issued by companies with low credit ratings or those undergoing financial distress, which increases the risk of default. As a result, investors demand a higher return on their investment, leading to higher yields.

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Junk Bonds [Blank]

Question 111

Multiple Choice

Junk bonds [blank].

A) pay little or no interest
B) are commonly used to finance municipal waste disposal facilities
C) are issued by the U S Treasury department
D) have yields that are considerably higher than those of the highest-rated bonds

Correct Answer: