Question

Destiny prefers investments that offer the highest possible returns, even if they are risky. Which of the following bonds is Destiny most likely to be interested in?

Answer 1

Since Destiny is mostly interested in higher return, he will hence most likely invest in bonds with very high risk rate. Hence, Destiny will most likely be interested in Junk bond.

• Both Municipal and savings bond are usually backed up by the government as as such they are safer to invest in. However, they have low rate of return.

• Corporate bonds are usually issued by profit - oriented companies and organizations and have a higher rate of return than municipal and savings bond.

• Junk bonds are a form of corporate bond with very high level of risk which is compensated by a very high return rate compared to other corporate bonds. There is a higher tendency that companies that issue junk bonds will default on their debt.

Therefore, Destiny will most likely be interested in a Junk bond.

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