Corporate Bonds

Debt security issued by corporations for the purpose of raising capital.  Corporate bonds are issued with a maturity date of over one year (maturity dates of less than one year are known as commercial paper) and usually pay interest payments, known as the coupon.  Interest rates are determined by the likelihood that a company will default (be unable to pay off) its debt.  Companies will sometimes use assets as collateral for their bonds. The bond will also pay out its face value on its maturity date.  Bonds are traded frequently due to changes in interest rates in the open market and perception of a company’s ability to be able to pay off the bond.

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