What are "corporate bonds"?
Corporations may issue bonds to raise capital to fund projects (instead of issuing new stock). The bonds are usually denominated in amounts of $1,000 and $5,000 with interest normally paid semi-annually. Corporate bonds come in several forms, depending on the maturity: short-term (less than five years), intermediate-term (five to twelve years), and long-term (over twelve years).
What do companies do with the money they make from selling bonds?
The proceeds from the sale of the bonds may help fund new plants and factories, purchase new equipment, upgrade old facilities, or retire more expensive debt, that ultimately may make the company able to compete and thrive in the future.
Are corporate bonds risky?
Corporate bonds are the riskiest forms of bond investing because of the risk that the company can default and fail.
Why are yields higher for corporate bonds than for government or municipal bonds?
Yields for corporate bonds tend to be higher than government or municipal bonds because of the risk. The higher the risk, the higher the return must be in order to make the investment attractive to investors.
What are some risks associated with corporate bond investments?
Although returns generated by corporate bond investments may be relatively high, they do come to investors with some risks. Both investment grade and high-yield non-in
Corporations have board meetings to decide on issuing bonds to raise money for such things as plant construction or upgrading equipment.
vestment grade corporate bonds may be exposed to event risks, as when, for instance, the corporation experiences an event such as a severe change in the price of a material or commodity the company uses to manufacture its products, an unexpected takeover or some form of corporate merger, or the company's restructuring. Corporate bonds may also be exposed to risks in factors that affect the equity value of the company, such as a difficulty in meeting cash or profit targets, or a general economic decline.