Like governments, corporations also borrow money by issuing bonds.

These bonds are called corporate

bonds. Corporate bonds raise funds for a company who run out of cash to develop new products, cover
immediate expenses, and fund construction of new projects. In the context of U.S, corporate bonds are
typically sold at a paramount of $1000 and companies pay bondholders a predetermined amount of
interest payments usually on a semi-annual basis as mentioned in the video. In terms of interest payment,
corporate bonds do not share the same potential tax advantage as municipal or government bonds and do
not have the backing of the full faith and credit by the government. Moreover, corporate bonds are
typically seen as riskier securities, so they usually have higher interest rates to compensate for this
additional risk but to compensate for this disadvantage, corporate bonds generally offer higher yields than
government securities.
Perhaps one of the basics of corporate bonds that I also significantly learned was its two general types.
Below is a diagram that shows my understanding on the categories under corporate bonds and how each
works based from the video:
 CORPORATE BONDS

Secured Bonds vs. Unsecured Bonds

are are

backed by some asset of value that the are not backed by any distinct physical
issuer can use as a security or collateral collateral but rather the credit of the issuer
and can be further claimed by thus they are given less priority in terms of
bondholders in case of default claims on assets than senior secured bonds

can be characterized as
some examples of
this type are

Debentures Subordinated
Mortgage Equipment Debentures
Collateral -are bonds which are
Trust
Bonds Trust Bonds Certificates unsecured by a -because of their
collateral. It is often lower precedence
-is a bond secured by -are secured bonds -the equipment in regarded as the other and subsequent
a mortgage on one or that are backed by this type of secured term for “unsecured credit risk, they may
more assets, typically the issuer’s bond serves as the bonds” itself offer higher yields
backed by real estate investment in other collateral and the
assets corporations titles of which are
held in trust until
debt has been repaid
to bondholders