What is the difference between an investment-grade bond and a junk bond?
What is the difference between an investment-grade bond and a junk bond?
Homework Answers
Bond with low credit rating with high proabability of default are called the junk bonds which means they need to issue at higher interest rate to investors to compensate for increased risk.
On the other side, investment grade bond are called the bonds with higher credit rating with low probability of default which means they are issued at low interest rate.
Junk bond are called high yield bonds and the difference on the interest rates between the investment-grade bond and a junk bond are called the spread.
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What is the difference between an investment-grade bond and a
junk bond?
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