An investor buys a corporate bond and enters a legal commitment with the issuer to receive interest on the principal amount until the bond is due. When the bond matures, the buyer is liable to receive the principal amount back.
A person who invests in bonds is basically providing a loan to the company and is only to receive the amount promised no matter how lucrative the company’s position get in the future. In case of losses, bondholders receive the interest and the first ones to be paid the principal.
To save investors from the risk of default, there is an independent watchdog in place which rates corporates on their creditworthiness based on their assets and payment history and strength to pay the debts in timely fashion.
Bonds that are AAA rated are the safest of all. The scale of creditworthiness plunges from the AAA ratings.Apply Now for Corporate Bonds
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