Final answer:
Junk or speculative bonds are rated BB or lower by Standard & Poor's, or Ba or lower by Moody's, and offer higher interest rates due to their higher risk of default. These are also known as high-yield bonds.
Step-by-step explanation:
Bonds that are considered junk/speculative are typically rated BB or lower by Standard & Poor's, or Ba or lower by Moody's. These ratings reflect a higher risk of default; therefore, these bonds offer higher interest rates to compensate investors for this risk. They are often referred to as high-yield bonds because of the greater yield they provide compared to investment-grade bonds. Companies that are still growing or have shaky businesses are more likely to issue such bonds. For example, well-known firms such as Turner Broadcasting and Microsoft issued junk bonds in the 1980s when they were in their growth stages.