Question: What Are Corporate Bonds?
Answer: Corporate bonds are issued by various corporations to raise capital to reinvest in their operations. For these companies, bonds are relatively safe and cost-effective. 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.Corporate bonds 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 adviser. They are less safe than government bonds, since there is a chance the company can go bankrupt and default on the bond.
