Some investors look for higher returns through riskier bonds called junk bonds.
Junk bonds are bonds which carry a higher risk of default than the other bonds issued by corporations or governments.
A bond is a debt or a promise to pay the investors, an interest payments along with the return of invested principal in exchange for buying the bond.
Junk bonds represent the bonds which are issued by companies which are financially struggling and have a high risk of defaulting and not paying their interest payments or repaying the principal to investors.
Junk bonds are also known as high-yield bonds because the higher yield is needed to help offset any risk of default.
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