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The term comes from a conversation between financier Michael Milken (who got filthy rich selling them) and billionaire Meshulam Riklis (who got filthy rich issuing them). In the old days, high-yield bonds were called "fallen angels"--investment-grade paper at issuance that fell from A-rated (investment grade) to low-B and C-rated (speculative grade) due to difficulties at the issuing company. The paper Riklis issued (and still issues) started out as speculative-grade bonds. Milken looked at what he was doing and said something like, "Meshulam, these are junk!" Riklis replied, "yes, but they pay interest and they sell at a discount."
What else can I help you with?
What type of bond has the highest risk?
High risk bonds are called junk bonds.
Why junk bonds pay a higher interest rate than government bonds of similar maturity?
Interest rates increase as perceived risk increases. Government bonds have virtually no risk. Junk bonds are so called because they carry a high risk of default.
What are bonds called that are rated below investment grade?
"Sub-Investment Grade" or "Junk"
What is the order of treasury bonds junk bonds and corporate bonds from lowest to highest risk of default?
-U.S. Treasury bonds -Corporate bonds -Junk bonds
How risky are junk bonds mutual funds?
Extremely Risky. Some of the risks involved in investing in Bonds are: 1. Interest Rate Risk 2. Re-investment Risk 3. Call Risk 4. Default Risk & 5. Inflation Risk The Default Risk is the highest risk factor wherein you may not get your money back and in case of Junk Bonds this is extremely high, that is why they are called Junk Bonds Junk Bonds refer to Bonds issued by company's with low creditworthiness and past history of default in payments
Why would a person invest in junk bonds-?
"Junk" bonds pay a higher interest rate than high-quality bonds, in order to compensate for the risk of default. junk bonds can pay very high interest rates (gradpoint)
What is the percentage of returns for high yield investments?
High-yield investments, also called "junk bonds", are bonds at risk of default or other problems, but have higher returns. This makes them risky but potentially rewarding. Junk bonds provide an average return of between 5 and 6 percent as of spring 2013.
What percentage of junk bonds default?
30?
What are the risks and benefits of buying junk bonds?
One advantage of purchasing junk bonds is it allows one to diversify investments over a larger group of different assets. The biggest benefit is they carry a high yield. However, junk bonds are also very high risk.
Michael Milken was imprisoned in the 1980s for?
Junk Bonds
Is there a website that lists junk bonds?
Junk bonds are high risk bonds. A list doesn't really exist because this is an opinionated topic that differs constantly. What is considered a high risk to one investor may not be to another.
What is the difference between junk bonds and traditional bonds?
A junk bond is any bond with a BB or below rating. Also called high-yield bonds, they can become this way following one of two paths. In the days before Michael Milken, investment-grade bonds became junk because of various downturns in a company's fortune. Milken's great innovation, the one that made him so rich he could pay a billion dollars in fines to the federal government and still be rich, was creating bonds that started out life as high-yield paper.
