Investors demand that junk bonds pay higher yields as compensation for the risk of investing in them.If a junk bond manages to turn its financial performance around and has its credit rating upgraded, the investor may see a substantial appreciation in the bond’s price.
A junk bond refers to high-yield or noninvestment-grade bonds.
Junk bonds are fixed-income instruments that carry a credit rating of BB or lower by Standard & Poor's, or Ba or below by Moody's Investors Service.
A secured bond uses specific assets that serve as collateral, and that collateral can be sold to make principal or interest payments if any payments are missed.
Unsecured bonds, on the other hand, are simply backed by the issuer’s ability to pay.
Bonds are rated based on the revenue they generate to make principal and interest payments, and based on any assets pledged to secure the bond.
Who pays while dating
Corporations, for example, are judged on their ability to generate earnings, while a municipality may issue a bond backed by fees from a toll road or a sports venue.
Investors purchase junk bonds to earn a higher interest rate than bonds of higher quality and to speculate on price increases.
If the company’s financial performance improves, the credit rating may increase, which increases the price of the junk bond.
Kate, a 33-year-old writer told me, "I tend to try to pay for myself, but as I get older and more comfortable with my awesomeness, I kind of wish and hope that the other person will be a little more old-fashioned about it." Good point.
If someone's eating opposite Amazing Me, shouldn't she or he pay for the privilege?