Risks and Rewards of Corporate Bonds

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Risks and Rewards of Corporate Bonds

Corporate bonds are debt securities issued by corporations to raise capital for various purposes, such as financing expansion, funding acquisitions, or refinancing existing debt.​ They are a popular choice for investors seeking fixed income investments and are often seen as an alternative to government bonds.​ However, like any investment, corporate bonds come with their own set of risks and rewards.​ In this article, we will explore the risks and rewards of investing in corporate bonds.​

Risks of Corporate Bonds

1.​ Credit Risk

Credit risk is the risk that the company issuing the bond will default on its payments of interest and principal.​ If a company goes bankrupt, the bondholders may not receive the full amount of their investment back.​ Higher-risk companies typically offer higher yields to compensate investors for the increased credit risk.​

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