Types of bonds
A corporate bond is debt issued by a company in order for it to raise capital.
An investor who buys a corporate bond is effectively lending money to the company in return for a series of interest payments, but these bonds may also actively trade on the secondary market..
Types of bonds
Corporate bonds fall into two broad credit classifications: investment-grade and speculative-grade (or high yield) bonds..
What are the two types of corporate bonds?
Corporate bonds fall into two broad credit classifications: investment-grade and speculative-grade (or high yield) bonds..
What is a difference in risk between treasury bonds and corporate bonds?
Generally, the higher the default risk, the greater the interest rate of return on the bond to compensate for more risk.
While corporate bonds all have some level of default risk (no matter how small), U.S.
Treasury bonds are used as a benchmark by the market because they have no default risk..
What is corporate bond risk?
If the issuer goes out of business, the investor may never get the promised interest payments or even get their principal back.
Corporate bonds are generally considered riskier than government bonds because governments have the option of raising taxes to meet their obligations..
What is the difference between corporate bonds and credit funds?
Most corporates typically have more credit risk and higher yields than government bonds of similar maturities.
This divergence creates a credit spread between corporates and government bonds, so that the corporate bond investor earns extra yield by taking on greater risk..
