Corporate Bonds

Image: Corporate Bonds

When you invest in a corporate bond, you are loaning to a corporation. The corporation then regularly pays interest on the value of the bonds you purchased.

At a stated date in the future (maturity date), the company returns the principal amount you purchased. The maturity date on corporate bonds can range from one to 40 years.

Corporate bonds offer the following features:

  • Income – You earn a fixed rate of interest, usually paid twice a year. 
  • Call protection – Most corporate bonds offer you some type of protection from early payoffs by the corporation. 
  • Liquidity – You can sell corporate bonds at their market value at any time before the maturity date. 
  • Price changes – While the amount of your interest will almost always remain the same, the value of your bond will change daily. 
  • Minimum purchase – You can purchase corporate bonds in multiples of $1,000 with a minimum purchase of $5,000.

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