Corporate Bonds

What are some risks associated with corporate bond investments?

Although returns generated by corporate bond investments may be relatively high, they do come to investors with some risks. Both investment grade and high-yield non-investment grade corporate bonds may be exposed to event risks, as when, for instance, the corporation experiences an event such as a severe change in the price of a material or commodity the company uses to manufacture its products, an unexpected takeover or some form of corporate merger, or the company’s restructuring. Corporate bonds may also be exposed to risks in factors that affect the equity value of the company, such as a difficulty in meeting cash or profit targets, or a general economic decline.


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