CORPORATE BONDS

Corporations can issue bonds just as it can issue stock, although corporate bonds tend to be of higher risk than Government bonds because companies tend to have larger potential to default. Due to the higher risk element they can be the most rewarding fixed income investment tools that investors can utilize within the bond markets, making it a very large and liquid market with an estimated average of $15 billion daily trading volume.

Like government bonds corporate bonds are divided into three groups:

• Short-term notes maturities of 1-4 years
• Medium term notes/bonds maturities of 5-12 years
• Long-term bonds maturities of 12+ Variations of corporate bonds include: –
• Convertible – holder can convert to stock on specified date
• Callable – company can redeem issue prior to maturity
• Puttable – investor can sell back to issuer prior to maturity