Question

Name at least two different types of bonds. Describe differences in yield and default risk. Explain why someone might choose to invest in each type.

Answer 1

Corporate bonds refer to bonds that can also issue stocks. Meanwhile, convertible bonds refer to redeemable bonds with a predetermined amount. Among he mentioned bonds, corporate bonds have higher yield than convertible bonds. However, the former also has higher risk than the latter. Someone tends to invest more on convertible bonds since they tend to minimize negative interpretations due to corporate actions.