NEWSWIRE - January 14, 2002
Topic: Bond Valuation
Source: "Junk Bonds Seem Poised to Leap Back To Top of the Heap," by Gregory Zuckerman, The Wall Street Journal, Monday, January 14, 2002, page C1.
Synopsis: As more economists forecast an economic recovery beginning in 2002, more corporations are issuing high-yield, or junk bonds. Junk bonds are a source of financing for firms that have few alternatives. The yield is high, around 12%, but the default risk is significant. Sixty issuers defaulted in the fourth quarter of 2001. Still, if investors are willing to endure risk and expect the economy to improve, the junk bond market offers the potential for significant returns.
Discussion Questions:
- What is a junk bond?
- Why are junk bonds "hot" at this point in time?
- As a CFO or corporate treasurer, why would you consider
issuing bonds with junk status?
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