A. By definition, securities that are rated at below investment grade are called junk bonds.
B. The use of junk bonds is not, and has not been, illegal.
C. Junk bonds are not worthless. Rather, they are very risky bonds because there is a much greater chance of default by the issuer, but the interest rate that they pay is much higher because of this increased risk.
D. Because of the high risk of junk bonds, they also return a very high rate of interest to balance this increased risk.
