ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What is a corporate bond? A bond is a debt obligation, like an Iou. Investors who buy corporate bonds are lending money to the company issuing the bond. In return, the company makes a legal commitment to pay interest on the principal and, in most cases, to return the principal when the bond comes due, or matures.

Detailed explanation-2: -Corporate bonds are debt securities issued by private and public corporations. Companies issue corporate bonds to raise money for a variety of purposes, such as building a new plant, purchasing equipment, or growing the business.

Detailed explanation-3: -Corporate bonds are a form of debt financing. They are a major source of capital for many businesses, along with equity, bank loans, and lines of credit.

Detailed explanation-4: -Most corporate bonds are debentures, meaning they are not secured by collateral. Investors in such bonds must assume not only interest rate risk but also credit risk, the chance that the corporate issuer will default on its debt obligations.

Detailed explanation-5: -A bond, like an equity, is a financial asset that can change hands between financial market participants.