What are Corporate Bonds?
Section 25 Module 6
Note: The typical rates of return quoted above are from investment grade corporate bonds in developed countries. High-yield and junk bonds typically offer higher rates of interest.
Corporate Bonds
- When you buy Corporate Bonds, you are lending money to a company.
- Corporate Bonds are debt Instruments ?and the company owes you money.
- The ability of a corporate to pay back its debt is called its Credit Rating.
- The company uses your money to create new products, expand & pays a fixed interest on your investment.
- If the corporate goes bankrupt, you can lose some or all of your money.
- Corporate bonds are capital protected on paper, and bond holders get paid before stock holders if the company goes bankrupt.
Remember - Corporate bonds offer high rates of return because they cannot print money like government bonds, and there is a significant capital risk if the company fails.