The Role of Junk Bonds in Corporate Finance

Essay aus dem Jahr 2009 im Fachbereich BWL - Investition und Finanzierung, Note: 1,7, FOM Hochschule fr Oekonomie und Management gemeinntzige GmbH, Hochschulstudienzentrum Hamburg, Sprache: Deutsch, Abstract: Junk bonds in corporate finance seen from the perspective of an issuer and an investor define the assignment scope. Giving both some hints when to use junk bonds is the main question to this assignment.
From the issuer point of view it is important to have safeguarding mechanism inside a bonds contract. Having a callable option on the bond is target number one. Information have to be past to the investor, putting the notice about the high interest rate into the view of the investor.
Information around the issuing firm according her actual economical status and her strategy are the most important source for any decision an investor should have before buying a junk bond. Taking care of an issuer safe guarding mechanisms could be a big pitfall to an investment. Taking a close look to the portfolio will help to find the right proportion for junk bonds regarding the selected return.