Corporate Bonds

Key Highlights

• A corporate bond is like a loan you give to a company to help fund things like growing their business, buying another company, or covering day-to-day costs.

• Types of corporate bonds includes investment grade vs. high-yield, callable vs. non-callable and fixed vs. floating rate.

What is Corporate Bond?

A corporate bond is like a loan you give to a company to help fund things like growing their business, buying another company, or covering day-to-day costs. In return, the company pays you interest regularly and gives back the loan amount when the bond matures.

Key Features

• Coupon: The interest you get paid regularly (could be monthly, every few months, or yearly).

• Face Value (Par Value): The amount you get back when the bond matures or if the company decides to pay it off early.

• Maturity Date: The day the company pays back the full loan amount.

Types of Corporate Bonds

• Investment Grade vs. High-Yield: Investment-grade bonds are safer. They might not offer high returns, but they’re more dependable and come with lower risk. High-yield bonds, on the other hand, carry higher risk but come with the potential for greater returns.

• Callable vs. Non-Callable: Callable bonds can be paid off early by the company; non-callable bonds stick around until maturity.

• Fixed vs. Floating Rate: Fixed-rate bonds pay the same interest every time; floating-rate bonds adjust interest based on market rates.