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Corporate Bonds

POSTED ON JUNE 11, 2021    

How finance folk use it

A corporate bond is a debt security that companies sell to raise capital for expansion, debt repayment or some other purpose.

 

When you buy a bond, you’re effectively lending the company money with the promise of being repaid in full in the future.

 

Is it good or bad?

A corporate bond represents an obligation of the company to repay the full amount (face value) at a predetermined date (maturity).

 

As compared to government debt securities, corporate bonds usually offer a higher coupon rate (the regular interest you’re paid for lending the company money). This is because there is much less risk that the government will not pay you back, as compared to a company.

 

What it means for you

You can check out corporate bonds if you want to invest in a product that will give you interest payments that are regular in both schedule and amount. These are available through banks.

 

Don’t forget that these should match the amount of risk you’re willing to take, as seen in your risk profile.

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