Corporate Bond

Corporate bond. Corporate bonds are debt securities issued by publicly held corporations to raise money for expansion or other business needs.

Corporate bonds typically pay a higher rate of interest than federal or municipal government bonds, but the interest you earn is generally fully taxable.

You may be able to buy corporate bonds at issue through your brokerage firm, usually at the offering price of $1,000 per bond, though you may have to buy several bonds of the same issue rather than just one.

You can buy bonds on the secondary market at their current market price, which may be higher or lower than par. However, most individual investors buy corporate bonds though a mutual fund that specializes in those issues.

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Corporate Bond

What Does Corporate Bond Mean?

A debt security issued by a corporation and sold to investors. The bond is backed by the company's ability to pay interest and principal, which typically comes from money earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds. Corporate bonds are considered higher risk than government bonds. As a result, interest rates are almost always higher on corporate bonds, even for top-flight credit quality companies.

Investopedia explains Corporate Bond

Corporate bonds are issued in blocks of $1,000 in par value (face value) and usually have a standard coupon payment structure. Corporate bonds also may contain call provisions to allow for early prepayment if prevailing rates change. Corporate bonds, that is, debt financing, along with equity and bank loans/lines of credit, are a major source of capital for businesses. In general, a company should exhibit consistent earnings potential to be able to offer debt securities to the public at a favorable coupon rate. The higher a company's perceived credit quality is, the easier it becomes to issue debt at lower interest rates and issue higher amounts of debt. Most corporate bonds are taxable and have maturities of more than one year. Corporate debt that matures in less than one year typically is called commercial paper.

Related Terms:
• Bond
• Debt Financing
• Municipal Bond
• Yield
• Yield to maturity—YTM