| Fixed Income Investing: Corporate Bonds |
- Corporate bonds are issued by corporations to raise money for capital expenditures—building plants, expanding facilities, and so on.
- Because corporate bonds involve more risk than government bonds, their yields are typically higher.
- Corporate bonds are usually safer than stocks.
- The stability of these bonds depends upon the earning power of their issuer. There are many corporate issuers to choose from, most with easily recognizable names.
- Maturities range from a few months to 40 years, and up to 100 years in a few cases.
- Corporate Bonds are considered senior debt obligations of the company. This means that, if problems arise in the company, the principal and interest must be paid off on the bonds before payments are made for other classes of securities, such as stock dividend payments.
- The interest paid by corporate bonds is generally fully taxable.
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