Corporate Bonds

Corporate bonds are debt securities issued by companies to raise capital. When investors buy corporate bonds, they are essentially lending money to the company in exchange for regular interest payments (coupons) and the return of the bond’s face value at maturity. Corporate bonds are an alternative to equity financing and are typically rated by credit agencies to indicate the issuer’s creditworthiness. They offer higher yields than government bonds but come with greater risk.

Example

An investor buys a corporate bond with a face value of $1,000, a 5% annual coupon rate, and a maturity of 10 years, receiving $50 in interest each year until the bond matures.