Junk Bond

Bonds that are carry high default risk with a high interest rate are referred to as Junk Bonds. This means that it is probable the Bond will lose most or all of its value. However, there is a small chance that the bond will survive. If the bond does survive, individuals involved will make a great deal of money in comparison to stable Bonds because of the higher interest rates attached to Junk Bonds. These bonds are extremely risky, and should not be purchased by those who do not have large available investing funds. The possibility of success on a junk bond simply does not outweigh the risk for the majority of individuals.

Fast Facts

  • Junk Bonds are the most common form of Bond.
  • Companies often manipulate their debt to remove their appearance as a Junk Bond company.

junk bond - Financial Planners, Articles and Q&A

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