Quick Definition

A junk bond is a high-risk, high-yield debt security rated below investment grade by major credit rating agencies.

Examples

• 1A company struggling financially issues junk bonds to raise capital quickly.
• 2An investor seeking higher returns might choose junk bonds over safer government bonds.
• 3During economic downturns, more companies might be downgraded to junk status, increasing the number of junk bonds in the market.
• 4A mutual fund specializing in high-yield bonds primarily holds junk bonds to achieve higher income for investors.

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