Final answer:
1)Junk bonds only pay interest if the issuer has sufficient income, offering higher interest rates due to the higher risk of default compared to government or investment-grade corporate bonds.
Step-by-step explanation:
The type of bond that only pays interest if the issuer has sufficient income is known as a 1) junk bond.
Junk bonds are high-yield bonds that offer higher interest rates because of the higher risk of default.
They are different from government bonds and investment-grade corporate bonds, which typically promise regular interest payments.
In the case of junk bonds, if the issuing company is not performing well financially and does not have enough income, it may not be able to pay the bond's interest.
The interest payments are therefore contingent on the company's performance, unlike more secure bonds such as those from the U.S. government (Treasury bonds) or from highly rated corporations.