Which of the following describes bonds rated ‘D’?

Bonds rated ‘D’ are indeed classified as bonds in default. This rating outcome indicates that the issuer has failed to make the required interest or principal payments. When a bond reaches this stage, it signifies that the lender is not receiving the anticipated returns and that there may be significant financial distress surrounding the issuer.

A ‘D’ rating clearly highlights severe risk, distinguishing these bonds from investment-grade classifications, which denote lower chances of default and higher creditworthiness. It also sets them apart from high-yield bonds, as these don’t necessarily imply default but rather higher risk associated with potentially lower credit ratings. Additionally, the designation of secured bonds refers to debts backed by specific assets of the issuer, again not applicable to bonds rated ‘D’ that reflect non-compliance with repayment obligations. Understanding these distinctions is crucial for assessing the risk involved in bond investments.