Generally we can divide the bonds market deals in two kinds of bonds, one is known as the corporate bonds while the other one is known as the municipal bonds. Here we would introduce and explain about the bonds and the ways one can make investment in them.
Corporate bonds, as the name suggests are issued by different business corporations. The only purpose behind floating these bonds is to collect the required capital that is needed for further investment as well as for meeting the daily expenses.
It is important to know that floating bonds is not the only option with business corporations for collecting money, rather they can also go for taking loans from banks, they can float shares in the stock exchange and of course the option of selling inventory is always in their hands.
The only reason why they rely upon corporate bonds is that they have to pay far less interest rate upon corporate bonds than that is demanded by banks or other financial institutions. Moreover, some times the condition of company is that much weak that no institution is ready to lend money to it.
While floating the bonds the companies do not need to keep the collateral with lending person as the bonds are not backed by any physical property of the company. It is just the reliability of a company that helps people decide about whether to buy the bonds of one company or not. Another advantage of floating bonds is that, if until the maturity date company does not want to pay back the money, it can convert these bonds into shares.
On the contrary, by investing into corporate bonds the investors help themselves get highest returns in the market. If an investment in the corporate bonds is made after a thorough research and in a professional way, one can get ones investment grow with an amazing pace.