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Junk Bond Definition

A junk bond is a high-yield bond issued by a company or entity with a lower credit rating and higher risk of default.

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What is a Junk Bond?

Junk bonds offer higher interest rates to compensate investors for the increased credit risk.

They are rated below investment grade by major credit rating agencies.

Example of Junk Bond

A bond issued by a financially struggling company offering an 11% yield to attract investors would typically be classified as a junk bond.

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