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What is a corporate bond?

A corporate bond is a type of debt security that is issued by a corporation in order to obtain additional financing. The corporation may issue the bond to raise additional funds for ongoing operations, to merge with or acquire another company, or to expand its business (new products, geography, etc.).

Corporate bonds typically pay interest, with the interest being taxable to investors and tax deductible for the corporation. Bonds may or may not have a call option, which allows the debt issuer (corporation) to redeem the bonds before its matures.

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  • What are examples of debt securities?

    A debt security is any security that is representing a creditor relationship with an outside entity. Examples of debt securities include corporate bonds, redeemable preferred stock, commercial paper, convertible debt, and government securities.