Answer:
Junk bonds are also known as:
High-yield bonds
option a
Explanation:
Junk bonds are fixed-income securities issued by companies or entities with a higher risk of defaulting on their debt obligations. These bonds are given a lower credit rating by credit rating agencies, indicating a higher level of risk compared to investment-grade bonds.
The term "junk" refers to the higher risk associated with these bonds, as they have a higher probability of defaulting on interest or principal payments. Due to this higher risk, junk bonds generally offer higher yields or interest rates to compensate investors for taking on the additional risk.
Investors who are willing to tolerate the increased risk may be attracted to junk bonds because of their potential for higher returns. However, it's important to note that investing in junk bonds carries a higher level of risk, and investors should carefully assess their risk tolerance and conduct thorough research before investing in these securities.
Therefore, junk bonds are commonly referred to as high-yield bonds due to their higher yield potential but also their higher risk profile.
