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Corporate Bonds: A Guide to Different Types and Uses

What are Corporate Bonds?

Corporate bonds are debt securities issued by companies to raise capital for various purposes. These bonds represent a loan that investors make to the company, and in return, the investors receive interest payments on a regular basis. When the bond matures, the company repays the principal amount to the investors.

Types of Corporate Bonds

There are two main types of corporate bonds: high-grade (or investment-grade) bonds and high-yield (or non-investment-grade) bonds.

• High-grade bonds are issued by companies with strong financial stability and a low risk of default. These bonds typically have lower interest rates than high-yield bonds.
• High-yield bonds are issued by companies with lower credit ratings and a higher risk of default. These bonds typically have higher interest rates than high-grade bonds.

Uses of Corporate Bonds

Companies use corporate bonds to raise capital for a variety of purposes, including:

• Funding operations
• Expanding operations
• Acquiring other companies
• Refinancing existing debt

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