How are high yield corporate bonds generally perceived in terms of risk?

High yield corporate bonds, often referred to as "junk bonds," are issued by companies with lower credit ratings. Because these issuers have a higher likelihood of defaulting on their debt obligations compared to companies with higher ratings, high yield corporate bonds carry a significant amount of risk. Investors demand higher returns for taking on this increased risk, which is what makes these bonds attractive to certain investors who are looking for opportunities that could yield a higher income.

These bonds are typically associated with higher returns that compensate for their elevated risk profile. Thus, they fit the classification of high-risk, high-return investments. Investors who purchase high yield corporate bonds are often seeking to enhance their portfolio's yield, recognizing that with the chance for greater returns comes the potential for greater losses if the issuing company fails to meet its debt obligations.

The other options suggest characteristics that do not align with the inherent nature of high yield corporate bonds. For instance, labeling them as low-risk would misrepresent their volatility and the possibility of default. Similarly, stating they carry average market risk misses the mark since their risk is notably above average. The claim that they are guaranteed by the federal government is incorrect, as high yield corporate bonds do not have such backing, further emphasizing their riskiness.