A junk bond is a type of corporate bond that carries a higher risk of default compared to investment-grade bonds. These bonds are rated below BBB- by credit rating agencies, indicating that the issuing company may have financial difficulties. Investors are attracted to junk bonds because they typically offer higher interest rates to compensate for the increased risk. Due to their higher yields, junk bonds can be appealing for those seeking greater returns. However, they also come with the potential for significant losses if the issuing company fails to meet its debt obligations. Investors should carefully assess their risk tolerance before investing in junk bonds.