Corporate bonds: A term paper

Alfonzo S.

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Corporate bonds: A term paper

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Abstract

Corporate Bonds are debt obligations issued by corporations as an alternative to issuing stock when raising capital. They are an alternative to issuing new shares on the stock market, and they are a form of debt finance. Companies of all sizes issue corporate bonds. In the United States today, corporate bonds are typically issued in par value of $1000 and in some cases $5000. This amount is usually pre-determined and paid semiannually. The interest that is received from the corporate bonds is taxable, and it must be declared. Both individuals and institutions may invest into corporate bonds.

Introduction
Corporate bonds and investors
Importance of corporate bonds
Evaluation of the bonds
The circumstances that affect corporate bonds' performance
Issue of corporate bonds
Purchasing a corporate bond
Trading corporate bonds
Conclusion
Sources

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[...] On the physical market, the brokerage you pay is a lot higher than what you do while trading online. The online trading firms charge a nominal brokerage which hardly affects your margin. There are also disadvantages associated with online trading. With online trading, the individual must do all research before investing. With physical brokerage firms, all investment information and suggestions are given to you. With online trading, the individual must do all research themselves before purchasing. Online brokers do not normally offer this service, which is why they can charge such low commissions. [...]

[...] In the financial world, investors may purchase corporate bonds because of possible personal and/or business related interests. For example, investors may purchase bonds from a corporation that may be attempting to finance a major project in a local city. Investors may choose to invest because the project could bring indirect benefits to the city through additional business and revenue, in addition to direct benefits such as the receipt of regular interest payments. Investors also evaluate benefits. For instance, one benefit is the steady income that can be obtained. [...]

[...] Corporate bonds are issued by public and private corporations. The Bonds are issued in the primary markets and is usually done through underwriting. The NASD, currently known as FINRA (Financial Industry Regulatory Authority) regulates trading of corporate bonds. It is interpreted and sanctioned by the U.S. Securities and Exchange Commission to discipline registered representatives and member firms that fail to comply with federal securities laws and NASD's rules and regulations. All broker and dealers, who are FINRA member firms, have an obligation to report transactions in corporate bonds to the Trade Reporting and Compliance Engine (TRACE) under an SEC approved set of rules. [...]

[...] If a person is interested in purchasing a corporate bond, one can go to a broker/brokerage firm or they may also invest online. There are pros and cons associated with each source. One benefit of brokerage firms is that a potential investor will be given access to all information, support, recommendations and investment advice. The broker or brokerage firm will also execute transactions regarding the bonds. There are a high majority of brokers who are honest and competent professionals, and organizations such as FINRA help make sure that those who are dishonest are identified and disciplined, and sometimes even barred from the industry. [...]

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