What is a corporate bond?

A corporate bond is debt issued by a company in order for it to raise capital. An investor who buys a corporate bond is effectively lending money to the company in return for a series of interest payments, but these bonds may also actively trade on the secondary market.

Do corporate bonds have a fixed interest rate?

The bonds may have a fixed interest rate or a rate that floats according to the movements of a particular economic indicator. Corporate bonds sometimes have call provisions to allow for early prepayment if prevailing interest rates change so dramatically that the company deems it can do better by issuing a new bond.

How much does it cost to buy a corporate bond?

Individual bonds: Corporate bonds are issued and sold in blocks of $1,000. Individual investors can buy them through Investment platforms, brokers, and financial services companies such as Fidelity, Vanguard, and E*TRADE, which charge fees of anything from $1 to $2 per bond.

Are corporate bonds more risky than government bonds?

In general, corporate bonds are considered to have a higher risk than U.S. government bonds. As a result, interest rates are almost always higher on corporate bonds, even for companies with top-flight credit quality. The difference between the yields on highly-rated corporate bonds and U.S. Treasuries is called the credit spread .