Question

Whitley recently started her own tutoring firm for high school students. To help finance her new business, which had a very limited track record, she issued bonds that offered relatively high rates of interest and had higher inherent risks. Which of the following types of bonds is Whitley most likely using in this scenario?A. junk bondsB. floating-rate bondsC. debenture bondsD. secured bondsE. serial bonds

Answer 1

Answer: Junk bonds

Explanation:

Junk bonds are a high-yielding high-risk security, that are issued by a company which is seeking to raise capital quickly to finance a takeover.

Junk bonds represent bonds that are issued by companies that are financially struggling and possess a high risk of not paying the interest or repaying the principal to investors. Junk bonds are a good investment for the investors who need the higher return and those that can also afford the higher risk.

Answer 2

Answer:

A. Junk Bonds

Explanation:

Junk bonds are a form of high risk, high yielding bond. It is a bond that has high yield but comes with a huge form of risk than majority of the bonds issued by private organizations and governments. Bonds itself are financial instruments used in acquiring capital investment. People most times opt for junk bonds in situations where they have nothing to lose as the high returns can come at a cost of losing all. Only individuals that are able to afford high risks participate in this kind of bond.