Corporate bonds are debt securities issued by companies to raise capital for various purposes such as expanding operations, funding research and development, or refinancing existing debt. When an investor buys a corporate bond, they are essentially lending money to the issuing company in exchange for periodic interest payments, known as coupon payments, and the return of the principal amount at the bond’s maturity date.
Corporate bonds come with varying levels of risk and return, largely dependent on the issuing company’s creditworthiness. This risk is often assessed by credit rating agencies, which assign ratings ranging from high-grade (low risk) to junk (high risk). Higher-rated bonds typically offer lower yields due to their lower risk, while lower-rated bonds offer higher yields to compensate for the increased risk of default.
Investors in corporate bonds should consider factors such as the issuer’s credit rating, the bond’s maturity date, and its coupon rate when making investment decisions. These factors can affect the bond’s price, yield, and overall attractiveness as an investment.
