Junk bonds earn their name because Question 7 options: a) they are riskier than higher rated bonds b) they are total investment junks c) they are considered untrustworthy d) investors will not be able to recoup their investment e) investors prefer other bonds over these bonds

Junk bonds are the bonds or debt instrument whose credit rating is very low. Chances of default are…

Answered: Junk bonds earn their name because…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

All things being equal are high convexity bonds more or less desirable to an investor and why?
Which of the following statements is false? O None of the choices. O Factors affecting bond yields include default risk, liquidity, interest rate risk, and expected future inflation. Bonds that don't payout interim coupon payments are called zero-coupon bonds. O YTM is the discount rate that equates the present value of future cash flows and current price of the bond. C If coupon rate is equal to YTM, the bond price equals the par value. Which of the following statement regarding common stock is false? C You may or may not get paid a dividend by owning a common stock. O If you don't receive a dividend, you can complain to your friend but cannot make any legal action. C Owning a common stock essentially means that you own a part of the firm. C By owning a common stock, you can cast your vote in a shareholder's meeting. C None of the choices.
Bonds that have investment-grade ratings from sources such as S&P tend to have higher interest (coupon) rates due to higher default risk. True False
Historical evidence indicates that stocks Seleccione una: a. underperform bonds. b. outperform bonds. C. Are less risky than bonds. d. have the same return as bonds.
These are corporate bonds that have a higher rate of return with a higher level of risk? Group of answer choices Revenue bonds Junk bonds GOBs Tax increment bonds
What are the characteristics of a zero-coupon bond, and why do investors purchase them despite the fact that they pay no interest?
When interest rates are low, buy bonds. True False
Which of the following statement is wrong? Group of answer choices a)the coupon rate of a newly issued bond is generally set equal to the required rate on bonds of equal risk. b)Since short-term interest is more volatile than the long-term interest rate, the price risk of short-term bond is more than that of the long-term bond c)The required rate of return for AAA bond is lower than that of an AA bond d)Sinking funds are provisions included in bond indentures that require companies to retire bonds on a scheduled basis prior to their final maturity.
Why think that convertibles are riskier than straight bonds?
Which of the following statements is most correct? Group of answer choices A debenture is a secured bond that is backed by some or all of the firm’s fixed assets. Junk bonds typically have a lower yield to maturity relative to investment grade bonds. Subordinated debt has more default risk than senior debt. All of the statements above are correct. None of the statements above is correct.
What causes a gain or loss on the sale of a bond investment? Group of answer choices when the selling company negotiates a better price when the selling price of the bond differs from the book value (cost) of the bond when the selling company has unamortized discounts when the selling company has unamortized premiums
A bond does not pay out regular interest. This means that *a. This is a bad investment.b. It is unsecured.c. It is a junk bond.d. It is a zero-coupon bond.

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