Corporate Bond

A corporate bond is a type of debt security issued by a corporation to raise capital for its business activities. When investors buy these bonds, the corporation promises to make periodic interest payments and to repay the principal amount at a specified maturity date.

Typically, corporate bonds offer higher yields than government bonds, but they also come with greater risks. The market value of a bond can fluctuate based on changes in interest rates. When interest rates rise, the value of existing bonds usually falls. If an investor decides to sell a bond before it matures, the sale price may be higher or lower than the original purchase price. However, by holding a bond until maturity, investors will receive the scheduled interest payments as well as their initial principal, as long as the issuer does not default. Investments that aim for higher yields often involve a higher level of risk.