High Yield Bonds

A

The correct answer is A. Junk bonds.

Junk bonds, also known as high-yield bonds, are issued by companies that are considered highly speculative because of their higher risk of default. These bonds are usually rated below investment grade, which means that they have a higher risk of default than investment-grade bonds.

Companies that issue junk bonds usually have lower credit ratings, lower earnings, and higher levels of debt than companies that issue investment-grade bonds. Junk bonds are generally issued by companies that are in a turnaround or growth phase, and the higher yields on these bonds compensate investors for the higher risk of default.

Municipal bonds, on the other hand, are issued by state and local governments to finance infrastructure projects and other public initiatives. These bonds are generally considered to be safer than junk bonds because they are backed by the taxing power of the government.

Callable bonds are bonds that can be redeemed by the issuer before their maturity date. This feature gives the issuer flexibility but can be a disadvantage to investors because they may not receive the full value of their investment if the bonds are called early.

Convertible bonds are a type of bond that can be converted into a specified number of shares of the issuer's stock at a predetermined price. These bonds offer the potential for higher returns if the issuer's stock price increases but also have a lower yield than non-convertible bonds.

In summary, Junk bonds are high yield bonds issued by companies that are considered highly speculative because of the risk of default. The other options, municipal bonds, callable bonds, and convertible bonds, are not generally considered high yield or speculative bonds.