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Finance Dictionary and Glossary of Investment Terms
A debt security issued by a corporation.
A bond issued by a corporation. Such bonds usually have a par value of $1,000, are taxable, have a term maturity, are paid for out of a sinking fund accumulated for that purpose, and are traded on major exchanges. Generally, these bonds pay higher rates than government or municipal bonds since the risk is higher. Corporate bonds have a wide range of ratings and yields because the financial health of the issuers can vary widely. A high-quality blue chip company might have bonds carrying an investment-grade rating such as AA (with a low yield but a lower risk of default), while a startup might have bonds carrying a "junk bond" rating (with a high yield but a higher risk of default). If a company goes bankrupt, both bondholders and stockholders can make a claim on the company's assets, but the claims of bondholders takes precedence over that of stockholders in a liquidation.