Final answer:
The investment goal for junk bond investors is to achieve higher returns in exchange for higher risk, whereas Treasury bond investors aim for safety and lower returns. Junk bonds are issued by companies with higher default risks, and Treasury bonds are low-risk investments backed by the U.S. government.
Step-by-step explanation:
The investment goal of someone who buys a junk bond versus a Treasury bond is quite different due to the risk and return profile associated with each type of bond. A junk bond investor is typically seeking higher returns, but must accept increased risk due to a higher chance of default. On the other hand, an investor in Treasury bonds is prioritizing safety and stability, as these bonds are backed by the U.S. government and therefore come with a lower return but also a significantly reduced risk.
Companies that might issue junk bonds could be growing firms or those with less stable business models, which is why they offer higher interest rates to attract investors despite the increased risk of default. Well-known companies such as Turner Broadcasting and Microsoft have issued junk bonds in the past during their growth phases. In contrast, the U.S. government, as an extremely safe borrower, can issue Treasury bonds with lower interest rates, being a virtually risk-free investment compared to corporate bonds.