Corporate Bonds
Description
A corporate bond is a loan to a corporation. When you invest in a bond, the corporation pays interest on the value of the bonds you purchased. At a stated date in the future (maturity date), the company returns your principal. The maturity date on corporate bonds can range from one to 40 years.
Objective
To provide regular income payments over the life of the bond.
Suitability
Corporate bonds are suitable for investors seeking regular income payments.
Features
- Regular Income: Corporate bonds pay a fixed rate of interest. They usually make interest payments twice a year.
- Call Protection: Under certain circumstances, such as a period of low interest rates, corporations have the ability to pay their bonds off prior to the actual maturity date on the bond. However, most corporate bonds provide the investor some type of protection from these early payoffs.
- Liquidity: In the event you would need to sell your bonds prior to their maturity date, corporate bonds can be sold on any business day at their current market value. This value may be the same, more than or less than the original amount invested.
- Taxation: Interest and capital gains earned from corporate bonds are subject to both federal and provincial taxes.
- Growth of Principal: Investors typically do not purchase corporate bonds for growth. They are considered income investments.
- Principal and Interest Guarantee: Each corporation is responsible for paying interest and returning principal to its bondholders. A corporation's financial strength will determine whether it has the ability to make these payments.
- Event Risk: Certain events can occur that cause the quality of a corporation's earnings to deteriorate. These events may cause the value of the bond to drop in price. Or, in certain cases, principal may not be returned in full.
- Minimum Purchase: Corporate bonds are purchased in multiples of $1,000 with a minimum purchase of $5,000.
For more information, please contact your Edward Jones financial advisor*.
