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Junk Bonds Are High Risk, High Yield Debt Instruments

question 70

True/False

Junk bonds are high risk, high yield debt instruments.They are often used to finance leveraged buyouts and mergers, and to provide financing to companies of questionable financial strength.


Definitions:

Rational Investor

An investor who makes decisions based on factual information and logical evaluation to maximize returns and minimize risks.

Interest Rate

The fee, represented as a portion of the total amount borrowed, that a lender imposes on a borrower for utilizing funds.

Bond

A bond is a fixed income instrument that represents a loan made by an investor to a borrower, often used by companies, municipalities, states, and sovereign governments to finance projects and operations.

Investment

The allocation of resources, usually money, in the expectation of generating an income or profit.

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