Junk Bonds

Paper Summary:

This paper analyzes the concept of junk bonds. It looks at the inherent risk of junk bonds, what factors determine whether a bond will be labeled a junk bond or an investment-grade bond, why they must offer higher returns to entice customers, and their viability on the investment front. The paper concludes with an overall positive, but cautious, assessment of junk bonds.

From the Paper:

"The stock markets are the financial hubs of a country where businesses thrive on the value of their reputation and financial prowess. It is also a place where the investors are often duped by companies that try to create artificial value for themselves. Junk bonds are a consequence of this trend of many companies, which try to attract value to their bonds through false propaganda and enticing dividends. Similarly, the price of a share of even reputed companies depends on a variety of factors and hence, one cannot expect a steady price for a stock no matter how strong the credibility of the company is. This inherent unpredictability in the stock markets required for some kind of official standardization of the bonds so that investors could be forewarned about the performance and risk factors of a particular bond."

More papers on Junk Bonds:

• Essay # 32838 : "Junk Bonds and LBOs"
• Essay # 52136 : "The Junk Bonds"
• Essay # 59073 : "Junk Bonds and Leveraged Buyouts"

APA Citation:

MLA Citation: