What happens if a bond defaults that is in a high yielding corporate bond fund?
If I buy a high yielding corporate bond fund and one of the bonds in that fund defaults what will that do? Lower the underlying fund price? Do anything to the interest rate? Thanks.
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Answer by JoeyV
The bond fund NAV drops by whatever the value of the bond that defaulted drops (usually bond defaults don't happen out of thin air so the bond is unlikely to be selling for 100 and drop to 30 or something). As the bond stops paying interest, the yield on the fund drops.
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