Corporate Bonds
A
corporate bond is a type of debt security that is issued by a firm and
sold to investors. The company gets the capital it needs and in return
the investor is paid a pre-established number of interest payments at
either a fixed or variable interest rate. When the bond expires, or
“reaches maturity,” the payments cease and the original investment is
returned.
The backing for the bond is generally the ability of
the company to repay, which depends on its prospects for future revenues
and profitability. In some cases, the company’s physical assets may be
used as collateral.
Key Takeaways:
A corporate bond is debt issued by a company in order for it to raise capital.
An investor who buys a corporate bond is effectively lending money to
the company in return for a series of interest payments, but these bonds
may also actively trade on the secondary market
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