Corporate bonds are debt instruments that companies issue to raise money for growth and expansion. Investors purchase these bonds and the company repays the principal plus interest over a fixed period of time. The process involves companies establishing themselves with brokerage firms to issue bonds that investors can purchase in denominations of $1000 or more through their brokerage. Investors receive annual interest payments until the bond's maturity date when the full principal is repaid, providing a stable investment. However, corporate bonds carry more risk than government bonds, with unsecured bonds having potential default risk.

1. CORPORATE BONDSEmanuel Yazichyan

2. What are corporate bonds?
● A corporate bond is an investment instrument
strategy used by businesses when they need
to raise money for growth and expansion.
● A bond is a security issued by a company to
an investor. The company repays this
investment with a fixed interest rate over a
pre-planned period of time.
Source: www.investinganswers.com

3. How corporate bonds work:
1. A company decides they want to expand,
but need financing for the necessary resources
2. They begin to establish themselves with
investment corporations, since this is where
investors view the different bonds available
along with the company's details and records,
like a catalogue.
SOURCE: www.investopedia.com

4. Continued:
● If bonds are chosen, the Par Value
is paid by the investor
● A par value is listed price of the bond
● A Corporate bond often costs around $1000
and is bought in $5,000 denominations
● These transactions are most commonly done through
investment companies like Fidelity and Dow Jones
Source: www.Forbes.com

5. Continued:
● The issuers repay the face value with
a 1-4% interest rate to the investors.
● These payments are compounded annually or
semi-annually toward the maturation date
● A maturation date is the date at
which the principal will be fully repaid
SOURCE: www.financialdictionary.com

6. What makes them different from other
investments?
● Businesses offering corporate bonds MUST
repay their investors at a fixed annual
or semi-annual rate, like a credit contract.
● The collective payment consists of a principal
and interest rate on top.
SOURCE: www.investorwords.com

7. Continued
● Unlike stocks, amount repaid stays the same
regardless of companies growth or liquidity
● Therefore, investors have a more stable investment
● Also, there’s Current Yield- where if the
price of a bond decreases, the interest rate
owed to the investors increases.
www.investopedia.com

8. Process of Buying Corporate Bonds
● Investors and average citizens have to choose
a brokerage firm with which to deal
● Brokerage firms include: E-trade, Vanguard, etc.
● Must review selection of bonds offered by
brokerage firms and choose what one wants
● Can be done with assistance of professional
investment forecasters or etc
SOURCE: Investopedia.com

9. Continued:
● Minimum investment usually five thousand dollars
● Bonds are often issued and sold in
one thousand dollar denominations
● Have to buy several bonds from company,
not individual
SOURCE: Investopedia.com

10. Rate of return
● the rate of return is annually or
semi-annually over a one- year period
until the bond’s maturation date.
● Bonds for private companies or ones issued
from the U.S. Treasury with an interest
rate of one through four percent and
anywhere in between.
SOURCE: Investopedia.com

11. continued…
● Yield is the amount of money
repaid on the initial investment at the
end of one year.
● There are no dividends involved and the
amount received is the combination of interests
and principal paid annually or semi-annually to
the investors until the bond matures.
SOURCE: Investopedia.com

12. continued...
● Unlike stocks, corporate bonds come with a
guarantee of a stable repayment and interest
rate that stays the same for the
investor regardless of the company's fluctuating
net worth or financial position
SOURCE: Investopedia.com

13. Liquidity
● corporate bonds’ liquidity is usually more liquid
than other bonds but in the UK
and US there have been articles stating
that liquidity of corporate bonds is lower
● shows that many new investments cannot be
bought or sold quickly enough to prevent
or minimize a loss.
SOURCE: investopedia.com

14. Restrictions
● must repay bond within year
● you have to repay the owner in
stable amounts consistently regardless of financial position.
pay the fee for the investment prior to the rent or food, etc.
● total minimum investment: five thousand dollars
whether bought at once or through five
one thousand dollar denominations
Source: investopedia.com

15. Tax Implications
● interest received from corporate bonds is subject
to federal and state income tax.
● can gain capital on corporate bond if
able to sell for profit before maturation
● if sold up to year from purchase,
gains are taxed at ordinary rate.
SOURCE: Investopedia.com

16. continued...
● sold more than year from purchase, long-term
capital gains taxed at max. rate: 15%
● If sold for less than what you
paid, you can incur a capital loss.
● If losses exceed gains, can deduct up
to $3,000.00 of net capital losses annually
from your income
Source: investopedia.com

17. continued..
● any capital losses exceeding three thousand dollars
are carried forward and can be used
in the future.
SOURCE: investopedia.com

18. Risk
● Risk is varied
● Secured vs. Unsecured bond
● Secured: not generally risky
● expecting to claim from company after it’s
unable to pay the annual/semi-annual fee.
● Unsecured: no guarantee that you will get
your money back, based on trust/luck
SOURCE: investopedia.com

19. Example

20. Our Opinion!
● corporate bonds more stable and sufficient
● emphasis on secured corporate bonds
● Waiting due to low levels of liquidity,
we will wait and see
SOURCE: our minds

21. Corporate Bonds!
Source: google images