Junk Bonds
Junk bonds are high-yield bonds that carry a higher risk of default compared to investment-grade bonds. They are issued by companies or entities with lower credit ratings, which means they are considered less financially stable. Investors are attracted to junk bonds because they offer higher interest rates to compensate for the increased risk.
These bonds are often used by companies to raise capital for expansion or other projects. While they can provide significant returns, investing in junk bonds requires careful consideration of the issuer's financial health and market conditions, as the potential for loss is greater than with safer investments.