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Junk Bond

Bonds with a lower credit rating—BB or lower—and typically a greater yield, that carry a higher default risk than the majority of corporate and governmental bonds. A bond is a debt or promise that, in exchange for being purchased, would pay investors interest payments as well as the return of their principal investment. Junk bonds are bonds issued by struggling businesses that run a significant risk of defaulting, failing to make interest payments, or failing to return investors' principle.

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