Which of the following is a characteristic of high yield debt?

High yield debt, commonly referred to as junk bonds, typically pays a fixed rate cash coupon, which is a characteristic that distinguishes it from other types of debt instruments. This fixed cash coupon provides investors with regular interest payments, making it an attractive investment for those willing to take on the higher risk associated with lower credit quality borrowers.

This characteristic is crucial for high yield debt because these bonds are issued by companies that may have lower credit ratings, which indicates a higher likelihood of default. As a result, to compensate investors for the increased risk, issuers typically offer higher interest rates, often structure the coupons as fixed-rate payments, and avoid features like variable rates that could complicate the return expectations.

In contrast, secured term loans and installment repayments are more commonly associated with investment-grade debt or senior secured loans, where the lender has a claim on specific assets. Additionally, requiring strong credit ratings to issue is characteristic of investment-grade debt, as high yield debt is issued by companies that do not meet those creditworthiness standards.