Trident FIN501 Module 4 Discussion Latest 2019 January Question # 00597733 Subject: Education Due on: 02/05/2019 Posted On: 02/05/2019 12:44 PM Tutorials: 1 Rating: 4.7/5
FIN501 Corporate
Finance
Module 4
Discussion
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.
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