Question

A company originally issued bonds that were rated investment grade. These bonds have now been downgraded to junk status. These bonds are referred to as:

1) called bonds
2) converted bonds
3) unprotected bonds
4) fallen angels
5) floaters

Answer 1

Bonds originally rated as investment grade but later downgraded to junk status are known as 'fallen angels.' They transition from a safer investment to higher risk. Despite this, they can still be part of a diversified investment strategy.

Step-by-step explanation:

When a company originally issues bonds that are considered investment grade and these bonds are later downgraded to junk status, they are referred to as fallen angels.

This term reflects the bond's transition from a safer investment to one that is considered higher risk due to the company's increased likelihood of financial trouble.

Though now labeled as junk bonds, these fallen angels may still be a part of a wise investor's diverse portfolio, which aids in reducing the overall risk of potentially defaulting issuers.

Bonds that have been downgraded from investment grade to junk status are referred to as fallen angels.

Fallen angels are bonds that were previously considered to be relatively safe investments, but due to a downgrade in their credit rating, they are now considered to be risky.