FIN 501 Week 4 Discussion | Assignment Help | Trident University
- trident-university / FIN 501
- 06 Feb 2021
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FIN 501 Week 4 Discussion | Assignment Help | Trident University
Discussion: Junk Bonds
If you have poor
credit due to being delinquent on credit card debt or other issues, chances are
the bank is going to charge you a higher interest rate on a personal loan, or
it might not give you a loan at all. Corporations face the same problems. If a
company takes on too much debt or is otherwise considered to be a credit risk,
then it also gets low credit ratings. In this case, if it wants to take on more
debt it needs to issue what is known as “junk bonds,” or as corporations prefer
to call them, “high-yield bonds.”
Whatever you
call these types of bonds, their key feature is that they pay higher interest
than bonds from a corporation that has a high credit rating. If you have a
401(k) or other retirement investment fund, chances are you have the option to
make a portion of your investment in these higher risk/higher return bonds.
Do some research on junk bonds. What kind of
controversies do you see with them? Do you think they are a solid investment
for your retirement, perhaps no riskier than most investments? Or do they
deserve the derogatory term “junk”? Share the links to the articles you find
with your classmates, and discuss your opinions as to whether you think the
higher interest rate justifies the increased risk.
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