Answer: High-yield bonds are typically rated below BBB grade.

## Explanation **Option C is correct:** High-yield bonds (also known as junk bonds) are typically rated below investment grade, which means they have ratings below BBB- (from Standard & Poor's and Fitch) or Baa3 (from Moody's). These bonds offer higher yields to compensate investors for the increased credit risk. **Why the other options are incorrect:** - **Option A:** High-yield bonds are NOT always issued by well-established companies with strong financial statements. In fact, they are often issued by companies with weaker credit profiles, higher leverage, or those in emerging industries. - **Option B:** Investment-grade bonds CAN become high-yield bonds through a process called "fallen angels." This occurs when a company's credit rating is downgraded from investment grade to speculative grade. - **Option D:** Step-up bonds do NOT pay no interest for a specified time period. Step-up bonds have coupon rates that increase over time according to a predetermined schedule, but they do pay interest throughout their term. The description in option D actually refers to zero-coupon bonds.

Author: LeetQuiz .