What is the implied risk of a speculative corporate bond compared to government bonds?

A speculative corporate bond is characterized by a higher risk of default than government bonds, which are typically seen as safe investments due to their backing by the government. This increased risk associated with speculative corporate bonds is often compensated for by offering higher potential returns to investors.

Investors generally seek a premium for taking on more risk, as evidenced by the yields on these speculative bonds being higher than those of government bonds. This reflects the market's assessment of the issuer's creditworthiness; speculative bonds are rated lower due to the greater possibility of default. In contrast, government bonds, especially those from stable governments, are perceived as lower risk because the likelihood of default is minimal, resulting in lower returns.

Thus, the correct understanding is that one should anticipate higher returns from speculative corporate bonds as a direct consequence of the higher risk involved, making B the accurate choice.