Corporate bonds are bonds issued by companies. Companies issue corporate bonds to raise money for a variety of purposes, such as building a new plant, purchasing equipment, or growing the business.
Corporate bonds are debt obligations of the issuer—the company that issued the bond. With a bond, the company promises to return the face value of the bond, also known as principal, on a specified maturity date. Until that date, the company usually pays you a stated rate of interest, generally semiannually. A corporate bond does not give you an ownership interest in the company—unlike when you purchase the company’s stock.