Definition of Junk Bond Fund

Junk bond fund is a speculative bond fund which invests in high yield bonds in order to achieve a high degree of current income.

Applying "Junk Bond Fund" to Securities Exams:

A junk bond fund is a mutual fund that invests in high yield / junk bonds in order to produce a higher level of current income for its mutual fund investors. The higher the degree of risk associated with the bonds in the portfolio the higher the interest rate. In order for an investor to be compensated for the risk associated with purchasing junk bond or bond fund the investor must receive an interest rate that is significantly higher than those of investment grade securities.

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