These types of bonds are issued by Private institutions, corporations or by public corporations. To raise money for various purposes like construction of a new plant, purchasing of new assets or equipment, companies issues such type of bonds. Corporate bonds can also know as “debt security” which is issued by Private Corporation and sold to investors.
BREAKING DOWN ‘Government Bond’
As compare to Government bonds, corporate bonds are riskier. As an outcome, the interest rates on corporate bonds are always greater than government bonds, even for those companies also which are the quality wise best company.
The Difference Between Corporate Bonds and Stocks
In the case of corporate bonds when a financier purchases any bond, he gives money to the company and equally when he purchase any bond of any company, that means he buys a piece of the company. In the case of Stocks present value of the company is responsible for the rise or fall in the value of the stocks, if the investor is allowed to accept the gross profit then he has to earn losses automatically. With bonds investors are only responsible for gaining interest not to gain profit, bonds are safer the stock because if a company will go into bankruptcy, it will pay to bondholders first and after that to stockholders.