How Do Corporate Bonds Work?

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With corporate bonds, a corporation is the one that is borrowing money, and under most cases, a corporate bond is issued directly by the corporation when it first comes out. Find out how corporate bonds often have their debts paid off early with help from a licensed financial planner in this free video on bonds and investing.

Part of the Video Series: Bond Investing
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Video Transcript

My name is Bill Rae. I'm with Alumni Financial Services. I've been in the business in the finance world for well over 20 years and today's question is how do corporate bonds work? Excellent question. First of all let me tell you we're not here to solicit or to give stock advice. However, just to get you a little understanding of the words of what they do. A bond in the finance world is a debt security in which an authorized issuer owes you or the one who is loaning the money a debt and is to be paid off at a certain time and an interest being paid on your money. With that being said a corporate bond simply is a corporation is the one that is going out asking for the money or borrowing the money if you will. Under most cases a corporate bond is issued directly by the corporation when it first comes out. You choosing to invest in that corporation get the bond and after that you're free to sell and to deal away just like you normally would any other type of security. However, in corporate bonds they do have the ability to pay that debt off early. Those are generally called callable. Again we urge you to take the time to study and to learn. There are many sources out there from the government to the private that will help you understand the language and understand the contracts and agreements and we urge you to do that. Know what it is that you're signing, what is expected of you, when and how you should get your money back and what are the costs and expected returns associated. My name is Bill Rae. I'm with Alumni Financial Services and as always we're here to help you build wealth.

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