corporate bond

A corporate bond is a debt security issued by a company to raise money. When you buy a corporate bond, you are essentially lending money to the company. In return, the company promises to pay you regular interest payments (called coupons) and return the original amount you lent (the principal) on a specific date, known as the maturity date.12

Corporate bonds are generally considered less risky than stocks because bondholders have a higher claim on a company's assets in case of bankruptcy. However, bonds do carry risks, such as interest rate risk (bond prices move inversely to interest rates) and default risk (the possibility the issuer won't repay the debt). Credit rating agencies, like Standard & Poor's and Moody's, assess the creditworthiness of bond issuers and assign ratings to help investors evaluate risk. Bonds rated BBB or higher are considered "investment grade," while those below are "junk bonds," offering higher interest rates but carrying greater risk.1342