Which statements about junk bonds are correct? Choose three correct answers.Junk bonds are considered a high-risk investment.Junk bonds have a bond rating of BB or lower.Junk bonds have a bond rating of BB or higher.Issuers of junk bonds are not likely to fail to pay interest. In the event of bankruptcy, junk bond owners will be paid before stockholders.

Junk bonds are below investment grade, so they carry a higher risk of default. Their ratings are typically BB or lower, making A and B correct; “BB or higher” includes investment-grade ratings, so C is not correct. Bondholders have a claim on a company’s assets before stockholders if the company goes bankrupt, so E is correct. Issuers of junk bonds are more likely—not less likely—to miss interest payments, so D is incorrect.

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