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Funds 406: Using Quirky Bond Funds

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1.
When shopping for a junk-bond fund, credit quality is the feature you should be concerned with.
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True. Credit risk is the big risk with these funds, so an investor should be most concerned with the credit quality of the underlying bonds.
2.
Treasury inflation-protected securities are issued by _______.
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The U.S. government. Because they are issued by Uncle Sam, they are considered very safe.
3.
Bank loan funds have high _______ risk.
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Credit. Because the loans come from lower-quality borrowers, the credit risk is elevated.
4.
Why do high-yield bonds offer such high income?
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They have high credit risk. These bonds offer high yields to compensate for the fact that they are big credit risks.
5.
Why do bank loan funds have high credit risk?
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The loans in the funds are from low-quality companies. Low-quality companies typically carry high risk of default.