What are the different types of bonds and their associated risks?

What are the different types of bonds and their associated risks?

There are several types of bonds, including government bonds, corporate bonds, municipal bonds, and high-yield bonds. Each type has its own risk profile.

Can you explain the risks associated with corporate bonds?

Corporate bonds carry credit risk, which is the risk that the issuing company may default on its payments. They also have interest rate risk.

What about government bonds? Are they safer?

Yes, government bonds, especially those issued by stable governments, are generally considered safer than corporate bonds. However, they still carry some risks, such as inflation risk.

What are high-yield bonds?

High-yield bonds, also known as junk bonds, are issued by companies with lower credit ratings. They offer higher returns but come with higher risk of default.