If an entity is at a heightened risk of defaulting, who is lining up to buy those junk bonds? What’s the benefit? From vantage point, purchasing junk bonds holds much more downside risk than there are upside. So, what’s the point of purchasing these bonds?
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Like when you buy anything, its the market and risk/reward. An old car with 300k miles may blow up the second you buy and drive it away. But it might not. If you drop the price low enough someone will take the chance. In the case of junk bonds, the borrower may default but they might not not. So if you drop the price of the bond enough it will result in a yield high enough that someone will be willing to take the chance.
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