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Junk bonds are
Suggested Answer: A
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Junk bonds are high-risk and therefore high-yield securities that are normally issued when the debt ratio is very high. Thus, the bondholders have as much risk as the holders of equity securities. Such bonds are not highly rated by credit evaluation companies. Junk bonds have become accepted because of the tax deductibility of the interest paid.
17 comments · newest first
JO
Josephine
23 days ago
I lean towards A. Understanding ratings is key.
MA
Marylou
28 days ago
I feel confused about junk bonds. A seems right, but C has a point.
JA
Janna
1 month ago
A is the best choice. Risky but can be profitable.
NI
Nickolas
1 month ago
D is incorrect. Junk bonds are legal.
LE
Letha
1 month ago
C is interesting, but not entirely accurate. They can yield high returns too.
YA
Yan
2 months ago
B is too extreme. They can still have value.
MI
Minna
2 months ago
Agreed, A makes sense. They carry higher risk.
LA
Lashandra
2 months ago
I think junk bonds are A. They’re rated below investment grade.
SA
Salina
2 months ago
C is misleading, they can offer high yields too!
NA
Nana
2 months ago
Wait, are junk bonds really illegal now?
LE
Lelia
2 months ago
B is definitely wrong, they can have value.
CA
Cassi
3 months ago
Totally agree with A!
ER
Ernest
3 months ago
A) Securities rated at less than investment grade.
FA
Fannie
3 months ago
I vaguely recall something about junk bonds being risky but not necessarily illegal, so D doesn’t sound right to me.
SH
Shad
3 months ago
I think I saw a similar question about bond ratings in practice exams, and it pointed to A being correct.
HA
Harley
3 months ago
I’m not entirely sure, but I feel like junk bonds can still have some value, so B seems wrong.
SH
Shasta
4 months ago
I remember studying that junk bonds are rated below investment grade, so I think A is the right answer.