1. If you have poor credit due to being delinquent on credit card debt or other issues, chances are the bank is going to charge you a higher interest rate on a personal loan, or it might not give you a loan at all. Corporations face the same problems. If a company takes on too much debt or is otherwise considered to be a credit risk, then it also gets low credit ratings. In this case, if it wants to take on more debt it needs to issue what is known as “junk bonds,” or as corporations prefer to call them, “high-yield bonds.”Whatever you call these types of bonds, their key feature is that they pay higher interest than bonds from a corporation that has a high credit rating. If you have a 401(k) or other retirement investment fund, chances are you have the option to make a portion of your investment in these higher risk/higher return bonds.Do some research on junk bonds. What kind of controversies do you see with them? Do you think they are a solid investment for your retirement, perhaps no riskier than most investments? Or do they deserve the derogatory term “junk”? Share the links to the articles you find with your classmates, and discuss your opinions as to whether you think the higher interest rate justifies the increased risk. 2. Junk bonds are high return or non-venture review bond which is settled pay instruments. These junk bonds have a score of BB, Ba or lower review. This is because of the way that junk bonds have a high default chance. These bonds are issued by organizations with a high capability of defaulting on the premium installments concurred by the organization and the financial specialists included. These bonds likewise have higher loan costs than different bonds from organizations with higher assessment. Financial specialists of junk bonds request higher pay as a result of trusting their monies with organizations with a notoriety that isn’t so useful for venture. Be that as it may, I trust the junks bond merit that term. This is on the grounds that the profits are theoretical. Junk bonds are truly not a venture to depend on particularly after retirement. This is on the grounds that as much as the venture is guessing of exceptional yields, on the off chance that the business defaults he financial specialist will lose of the underlying speculation. In other words, on the off chance that you had contributed all your retirement benefits, you will lose every one of them. The accompanying connections ought to be helpful in adapting progressively about junk bonds. The exceptional yields legitimize the high dangers, as long as the security is evaluated non-speculation and financial specialists comprehend what they are getting themselves into.My personal experience with a high-interest rate loan, was at 18 years when I bought my first car from a used car dealership. My credit history was very premature that it was hard finding a bank that would take the risk. Finally, the dealer was able to find me a lender that took the highest credit score reported by a credit agency, which requested my dad to become the co-buyer and put down a good down payment.Junk bonds, also known as high-yield bonds have earned a negative stigma of being risky bonds that are sold cheaply due to their unstable value. These loans lose their value once they fall below the ratings of credit agencies. According to Carlozo (2018), investors should not stop and think about acquiring these type of bonds and run away from junk bonds (para 3.). This type of bonds should not be considered and good retirement investments since the risk are very high. Junk bonds have a high percentage of default and their value is very dependent on interest rates, so if interest rates go up the investment loses value which will bring down the investment profits (Smith, 2018).Junk bonds are in no way a good option for a retirement investment. They are too risky and have a very little to none financial life spam. Good options for retirement investments are for example real estate investment which is not greatly affected by the stock market (Rose, 2015)3. Some of the controversies that I see with them are: (1) negative economic trends can cause default on payments, (2) Refinancing can rise dramatically causing a higher payment rate which may not be met. The pros: (1) higher yield percentages, (2) terms can be over a longer period giving individuals and companies time to repay loans, etc. Based on this knowledge, junk bonds for retirement are good only if the yield is lower and they are riskier if the yield is higher and this can result in a loss of retirement funds. It is for this reason to which junk bonds have earned the term “junk.” “The bonds in high-yield funds are called “junk” for a reason. They’re issued by companies with poor ratings for credit quality, BB or below—often way below.” (AARP, 2016, p.1)
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