Nobody downloaded yet

High Yield Junk Bonds Business - Research Paper Example

Comments (1) Cite this document
Is it wise to allocate a portion of one’s portfolio to junk bonds?
Since the 1930s, bank regulators have issued regulations that restrain banks from investing in securities that can be classified as precursors of junk bonds…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97% of users find it useful
High Yield Junk Bonds Business Research Paper
Read TextPreview

Extract of sample "High Yield Junk Bonds Business"

Download file to see previous pages
The corporate bonds with good or highly favorable rating grades are classified as “investment-grade bonds” while those with low ratings are called “low-grade” or “speculative” bonds or by their less formal term, “junk bonds” (Becketti, 1990). In other words, based on Becketti (1990), junk bonds, low-grade bonds, and speculative bonds are synonyms.
According to Becketti (1990), a bond may be classified as a junk bond for three reasons. First, the outlook for the company may be highly unfavorable. Second, the issuing company for the bonds may have large or significant debts. Finally or third, is that the company’s legal claim on another firm’s assets which is in default or has serious risks of default may be behind the legal claims of other companies.
However, Taggart pointed out that despite their low-investment grade status, junk bonds are nevertheless classified as “high yield bonds” by “those wishing to avoid pejorative connotations.” It is very important to state, however, that although junk bonds experience more default, they also tend to have higher returns. More recent data are not immediately available. However, for 1974-1985, the default on junk bonds stood at 1.53% compared to 0.09% for all bonds. The 1.53% may be high compared to 0.09% but certainly 1.53% seems low enough. Further, various reports also suggest that annual return for junk bonds was 12.4% compared to 9.7% for all long-term government bonds. (Taggart, 1987, p. 12). In the 1990s, many economic observers have attributed the country’s economic ills to junk bonds (Becketti, 1990, p. 46). Many observers believed that junk bonds and economic ills simultaneously emerged in the 1980s (Becketti, 1990). However, on the observation, the appropriate interpretation is that the market for junk bonds actually became only popular in the 1970s and 1980s but they have been in the US economy for some time (Becketti, 1990). In 1977, new issues of junk bonds in the United States were close to zero but they steadily climbed up to around US$33 billion in 1986 and to around US$30 billion in 1989 (Becketti, 1990). Becketti (1990, p. 48) argued that despite their size in the US economy for close to two decades, “junk bonds are too small a part of the debt market to account for the growth in corporate debt.” Further, Becketti (1990, p. 48) also argued that although junk bonds are riskier than investment-grade bonds, they are “less risky than equities.” Becketti (1990, p. 48) also clarified that “junk bond returns lie between those of investment-grade bonds and equities.” In addition, “junk bonds are more liquid than bank loans and private placements but less liquid than equities” (Becketti, 1990, p. 48). Junk bonds can also provide investors “more control over corporate management” than investment-grade bonds but less control than many financial instruments like equities (Becketti, 1990, p. 48). If one examines the descriptions of Becketti (1990), it should be easy to conclude that junk bonds aren’t too bad after all. Based on the literature that will be examined by this work on the nature of junk bonds and issues related to the acquisition of junk bonds, there is a genuine case for investing in junk bonds as well as improving the situation of the junk bonds market. Junk bonds are risky investments but they can be part of one’s investment strategy for increased wealth. Further, contrary to the view that our ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“High Yield Junk Bonds Business Research Paper Example | Topics and Well Written Essays - 3750 words”, n.d.)
Retrieved de
(High Yield Junk Bonds Business Research Paper Example | Topics and Well Written Essays - 3750 Words)
“High Yield Junk Bonds Business Research Paper Example | Topics and Well Written Essays - 3750 Words”, n.d.
  • Cited: 0 times
Comments (1)
Click to create a comment or rate a document
cgerhold added comment 10 months ago
Student rated this paper as
Excellent paper! Used it to finish an assignment for a business course. It was easy as ABC, for the first time in my life.

CHECK THESE SAMPLES OF High Yield Junk Bonds Business Research Paper

Rate Making Formula vs. Bonds

...Rate Making Formula vs. Bonds Introduction The CSAPR regulations formulated by EPA in July 2011 and set to be implemented by January 2012 has brought sharp reactions from stakeholders. These require reduction of SO2 and NOX emissions by power plants in 28 states1. The rules will cost $800 million annually until 2014 in addition to $1.6 billion already spent annually under its predecessor, CAIR, in capital investments. The industry players say that the rule is the most costly and burdensome to the business and consumers and analysts say that it is likely to increase consumer bills by an estimated 40 to 60 percent by 20142. Consumer advocacy groups have also come out to fight the utility rate hikes as well...
35 Pages(8750 words)Research Paper

Removal of junk foods from vending machines

..., this is another one of the unhealthy habits that people have adopted, without realizing what price they might have to pay for it. Therefore, my opinion is that this new trend of increased consumption of junk foods rather than nutritional food items, and soft drinks instead of water should be discouraged, as it certainly has an adverse impact on one’s life, both physically and socially. Junk food might look good and tastes delicious too, but it has its negative side too. Most of these junk food items have a higher proportion of calories, which result in overweight conditions amongst individuals and also can cause heart diseases due to high content of salt found in these...
3 Pages(750 words)Research Paper

High Strangeness

...English High Strangeness How Did People Build Pyramids? Shapes of the pyramids are symbols resemble rays of the sun; though there are numerous theories seeking to explain reasons for construction of the pyramids. In fact, one of these reasons regards outrageous theories indicated that they were constructed by aliens (ScienceDaily, 1). Nonetheless, substantial proofs have been gathered to indicate that they were built by ancient Egyptians, though there are no theories offering a clear explanation of the ways these pyramids were built, however, this paper will focus on discussing relevant ideas regarding the way pyramids were built. Blocks used for construction of these pyramids were obtained from quarries by use tools...
4 Pages(1000 words)Research Paper

Ploting the current yield curve

.... The research team explained that the rates of interests fell within ten years at a rate of 1.58 percent per year because investors turned to government debt in an attempt to salvage the future of their businesses (Slane, 2004). The decline in the interest rates and yields is caused by the increase in treasury prices. Interest rates proceeded to reduce further as years moved on and the global banks attempt to maintain rates at their lowest in order to encourage their economic growths and encourage more lending (Friedman, 2004)). Even so, the view of reducing the speed of growth of the globe moves the rates to lower values, considering the demand which investors have for trading with safer assets....
4 Pages(1000 words)Research Paper

Alfalfa hay yield prediction using yield monitor data and satellite imagery

...are exaggerated and the Predicted yield was very high compared to actual yield. 2 24-Mar-12 30-Mar-12 4.39 20-Mar-12 2.48 Harvested 2 days after satellite pass with the age of 36 days of crop; Predicted yield was very low when compared to actual yield. It may be due to the effect of saturated NDVI 3 28-Apr-12 4-May-12 2.95 21-Apr-12 2.47 Harvested before 7 days of satellite pass with the age of 27 days of crop; Predicted yield was coinciding with actual yield. 4 28-May-12 2-Jun-12 3.77 1-Jun-12 2.53 harvested crop was racked on the date of satellite pass; the age of crop at the time of harvestation was 25 days. 5...
8 Pages(2000 words)Research Paper

Secured Bonds

...Secured Bonds Secured Bonds Some bonds are ified as “secured” when it is “backed by a collateral such as a mortgage or lien, the title of which will be transferred to the bondholders in case of default” (WebFinance, Inc., 2011). There are different types of secured bonds and the most common form are mortgage bonds which are backed by real estate or physical equipment that may be liquidated. These bond are perceived to have very little risk; thus, being high-grade bonds (WebFinance, Inc., 2011). Another form of a secured bond is the equipment trust certificates. The collateral for...
1 Pages(250 words)Research Paper

Reserch Disaster Bonds (also known as CAT bonds or catastrophe bonds)

...million dollars while covering for earthquake, Atlantic and pacific hurricanes. Some organizations would invest in CAT bonds because of the high yield in return and portfolio diversification (GAO 27). Any other organizations that want to protect themselves against future damages would also buy the CAT bonds for the security. Tokyo Disneyland and FIFA used them in place of risk against earthquake and terrorism respectively. All heavily investing companies or insurers, especially in severe areas, where damaging natural phenomenal is recurrent, are advised to securitize their assets against any loss in future. The advantages of CAT bonds to the buyers...
8 Pages(2000 words)Research Paper

Treasury Yield Curve

...of this recuperation might eventually bring about a correction which maybe furnishes a proportional payback 500 once again to levels near where it began 2014. That is, despite the fact that in the not so distant future may demonstrate the best budgetary execution of the recuperation, it might likewise transform an unpredictable and frustratingly level stock business sector. Graph the curve at year end 2010, 2011, 2012, 2013, and 2014 [Source: (Resource Center)] Corporate Bond Credit Worthiness  1 High-yield bond portfolios focus on lower level quality bonds, which are riskier than those of higher-quality companies. These portfolios...
8 Pages(2000 words)Research Paper

High Level business architecture

...High Level business architecture By and Introduction Whenever a business designs a new product or service, the business case and the objectives of such an idea are defined forthright and detailed further with the use of business as well as other functional requirements. Business requirements specification therefore takes two levels of complexity to include the high level requirements and the functional requirements (, 2014). Business requirements can be defined as the high level needs or necessities which after fulfillment by an organization lead to the...
4 Pages(1000 words)Research Paper

International Business Finance amount of all kind of coupon payments due at the time of maturity (Stoffman, 2008). 2.2.4. Quality of Credit Before investing in any bond, the lenders prefer to evaluate the credibility of the issuer in order to determine the degree of default risk associated with their investments. For this purpose, the investors tend to examine the rating provided by the recognized credit rating agencies such as Moodys Investors Service and Standard and Poors. However, such rating depends on multiple factors. For instance, as high level of risk is associated with high- yield bonds, the credit rating agencies tend to provide a lower rating to such...
8 Pages(2000 words)Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Research Paper on topic High Yield Junk Bonds Business Research Paper for FREE!

Contact Us