question archive What is a low-rated, potentially higher-paying bond called?

What is a low-rated, potentially higher-paying bond called?

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What is a low-rated, potentially higher-paying bond called?

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A low-rated bond that has a potential to pay higher yields is called a junk bond. Junk bonds are usually bonds that have a credit rating of BB or below and carry the potential of the borrowers defaulting on it.

In order to attract financing, junk bonds need to promise higher interest rates and may be issued at discounts on face-value to attract investors.