Investment VehiclesQuestion 94 of 100
High-yield (junk) bonds are characterized by:
a.Investment-grade ratings and low default risk
b.Government backing
c.Lower credit ratings, higher yields, and greater default risk
d.Guaranteed principal repayment
Explanation
High-yield bonds carry below-investment-grade ratings and compensate investors with higher yields to offset elevated default risk. They are more sensitive to economic downturns and issuer credit deterioration. Suitability requires a client who can tolerate this credit risk.
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