Question: What Are Corporate Bonds?
Answer: Corporate bonds are issued by various corporations, and are rated as to their risk by Moody's or Standard & Poor's. The higher the risk, the higher the return the corporation must promise. You can buy corporate bonds individually, or through a bond fund, from your financial advisor. They are less safe than government bonds, since there is a chance the company can go bankrupt and default on the bond.
Corporate bonds offer corporations a relatively safe way to gain funds for investment in the company's growth. The alternative is to go public and raise equity by selling stocks. This is a long and expensive procedure. Selling bonds, while still complicated, is relatively much easier and provides a quicker way to raise capital for corporate expansion.
