Types of Corporate Bonds

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Most types of corporate bonds only differ in the rate of return and the duration of the bond. Find out how the credit rating of the company that issues the bond affects the rate of return with information from an investments manager in this free video on investing.

Part of the Video Series: Stocks, Bonds & Investments
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Video Transcript

Okay. Types of corporate bonds. Most corporate bonds are relatively the same animal. The thing that you're going to see that's different in corporate bonds, primarily, is the amount of...the rate of return and the duration of the bond. So some bonds may go for five years, ten years, thirty years. So you're really going to see what duration do you want to have that money held in the bond. You can always sell the bond, but you do take the risk that the value of the risk has gone down during that term. If you buy the bond at the beginning and hold it to the end, you will get what you put in on the back end and you will receive the stated rate of return during the duration of the bond. Now, different ratings of those bonds will create different rates of return or different interest rates. And the yield on those bonds, or the interest rate, is going to be determined by the credit ratings. So a lower credit rating will give you a higher rate of return. A high credit rating will give you a lower rate of return. And really, then when you're analyzing the different types of corporate bonds is just to find a place where you're comfortable with the amount of return and also looking at the credit risk that's inherent in the debt that you're investing in.

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