Articles » Corporate Bonds
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When a corporation needs to find extra money, one of the ways they raise funds is through selling bonds. You are basically loaning the company money when you purchase a corporate bond.
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Corporate bonds are IOUs issued by private and public corporations to raise capital. Corporate bond promises to pay back your entire principal amount along with interest. They offer higher interests than government or municipal bonds.
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Is It Safe To Invest In Corporate Bonds?
Corporate bonds are like lending money or providing a loan to a business. The lender loans money to a company or corporation, in return the corporation pays you interest on the money that you have lent them. The company that has borrowed the money commits to you or gives you their promise that they will pay back the money borrowed on a pre-arranged date. This is called the maturity date.
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A bond is similar to a certificate of deposit (CD). With a five-year CD, for example, a bank agrees to pay you a set interest rate, say, 6 percent. If all goes according to plan, at the end of five years of earning the 6 percent annual interest, you get back the principal that you originally invested.
