Bonds, Corporate

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.

When you buy a corporate bond, you lend money to the "issuer," the company that issued the bond. In exchange, the company promises to return your money, also known as "principal," on a specified maturity date. Until that date, the corporation usually pays you a stated rate of interest, generally semiannually. While a corporate bond gives you an IOU from the company, you do not have an ownership interest in the issuing corporation—unlike when you purchase the company's stock.

The Bond Market Association has a brochure, An Investor's Guide to Corporate Bonds, which explains corporate bonds and how you can make money by lending your money to corporations.

The NASD has a database on corporate bonds that can help you get market information about corporate bonds.