Junk Bond

The name junk is not exactly a positive word, and so this connotation holds over to a junk bond, which is considered to be one issued of a poor grade, and therefore with a significant perceived rate of not paying out.

Because of this risk, these bonds generally related under BB have to pay a higher rate if interest than investment grade bonds in order to attract people to take them up in order to offset the risk.

Related Articles

Early withdrawal penalty
Deflation
Discounted cash flow
Escrow
Limit order

More Financial Words and Vocabulary Explained