Concept

♤ Corporate bonds are debt securities issued by private and public corporations.

♤ Companies issue corporate bonds to raise money for a variety of purposes, such as building a new plant, purchasing equipment, or growing the business.

♤ When one buys a corporate bond, one lends money to the "issuer," the company that issued the bond.

♤ In exchange, the company promises to return the money, also known as "principal," on a specified maturity date. Until that date, the company usually pays you a stated rate of interest, generally semiannually.

♤ While a corporate bond gives an IOU from the company, it does not have an ownership interest in the issuing company, unlike when one purchases the company's equity stock.