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Corporate Bonds
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A corporate bond is an IOU issued by a public company, such as BT, ICI or Marks & Spencer.
When you invest in a corporate bond, you are lending money to the company. In return you will receive interest at a fixed rate and the promise that your capital will be repaid at a certain date in the future.
The guarantee that your capital will be returned is only as good as the company you are lending money to. While BT, ICI or Marks & Spencer are considered 'good risks' by investment pundits because they are blue chip companies, other smaller companies are likely to be a less good risk.
Most private investors first became interested in corporate bonds when they were made eligible for inclusion in PEPs .You may now invest in corporate bonds via an ISA
Last Updated: May 2007 © Moneyextra.com
Our senior editor Robin Amlôt recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.