Bonds

Unrated bonds, or 'junk bonds' as they are sometimes called have silly high returns because the risk of the face value, and the coupons not being paid back is high.
So more risk = more return (price is lower for capital return or coupon is higher for income returns)

For example a Treasury bill has AAA rating, for the seller to default the UK central bank would go under (not unheard of in the cases of Argentina, Russia etc) but generally bullet proof.
With a lower rated bond, there is more risk they could default, e/g a company desperately seeking liquidity where the likelihood of default is higher and thus to entice investors they have to offer greater returns than a T bill etc.
 
Buy them and then get a credit default swap - guaranteed no risk*


*may not be true
 
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So was I correct in the fact that their price is 6.28% of the face value or that the price listed there is in fact the percentage?
 
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yes. its pricing at 6.48% of maturity value. Maturity value is 100, so price is 6.48. Given that it is junk and the company is bankrupt the chances of you getting anything back are small. That page also tells you that if you buy at 6.48, hold it to maturity and the company magically buys it back from you when it matures then your return would be 580%. That won't happen though.

Given that a lot of hedge funds are in trouble at the moment for buying debt of dubious companies and the fact that we are heading into a recession its not something that I would advise buying.
 
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