junk bond

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junk bond,

a bondbond,
in finance, usually a formal certificate of indebtedness issued in writing by governments or business corporations in return for loans. It bears interest and promises to pay a certain sum of money to the holder after a definite period, usually 10 to 20 years.
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 that involves greater than usual risk as an investment and pays a relatively high rate of interest, typically issued by a company lacking an established earnings history or having a questionable credit history. Junk bonds became a common means for raising business capital in the 1980s, when they were used to help finance the purchase of companies, especially by leveraged buyoutsleveraged buyout,
the takeover of a company, financed by borrowed funds. Often, the target company's assets are used as security for the loans acquired to finance the purchase.
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; the sale of junk bonds continued to be used in the 1990s to generate capital. See also Milken, MichaelMilken, Michael Robert
, 1946–, American financial executive, b. Van Nuys, Calif. Nicknamed the "junk bond king," he was an executive at Drexel Burnham Lambert, Inc., where he transformed corporate takeovers and financing by the use of high-yield junk bonds.
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