Economy of a country

1. What role does a corporate bonds market play in economy of a country A bond is a debt obligation, where the borrower is a government or private entity and the lender is the investor. Among the different types of bonds available for investors, corporate bonds are a popular choice among investors. Let’s delve deeper into corporate bonds

2. What are Corporate Bonds and how do they boost the country’s economy? A corporate bond can be understood as a kind of debt security issued by a private or public company to generate capital. These are sold to investors who get pre-decided interest payments at a fixed or variable rate of interest. When the bond completes its tenure and reaches maturity, the interest payment stops and the amount originally invested by the investor is returned to him. The money a company raises through corporate bonds can be used for various business activities like the purchase of new equipment, building a new plant, increasing production, etc. As businesses expand their activities, it increases production and the supply of goods in the market. Moreover, it creates employment avenues in the country, boosting the per capita income of the nation.

3. In most cases, the interest payment on a corporate bond is semi-annual. A corporate bond does not generate an ownership interest in the company for the bondholder, unlike equity. Additionally, bondholders get preference over shareholders in case the issuing company files bankruptcy.

4. How to do valuation of Corporate Bonds? Corporate bonds can help you diversify your investment portfolio and reduce your risk. Whenever there is a spike in the interest rates, corporate bonds decrease in value and when there is a fall in the interest rates, the value of corporate bonds increases. The degree of price volatility for a corporate bond increases with its maturity.

5. Types of Corporate Bonds • Fixed-rate bonds: Fixed-rate corporate bonds are issued for a fixed duration and offer a fixed interest rate to the bondholder. • Floating-rate bonds: Floating-rate bonds are usually issued by firms that are valued below the investment grade. These corporate bonds come with a variable interest rate. • Zero-coupon bonds: These bonds do not offer interest payment and are bought below the face value of the bond and sold at full value on maturity. • Convertible bonds: These bonds are endowed with the flexibility that the bond-issuing company can pay the investor with common stock in place of cash on the maturity of the bond.

6. How to buy Corporate Bonds? You can buy corporate bonds in India through the following channels: • Through a broker: An investor can buy corporate bonds through a broker. If you already have an account with a broker, you can ask them to place an order for you, or you can open an account with a new broker and buy corporate bonds through them. While investing in corporate bonds through a broker, an investor should know in detail about the bond he plans to buy. • Through online platforms: Buying corporate bonds through online platforms is the most reliable, quick, and stress-free option available. These platforms help investors make an informed decision by providing them with enough research and insight on the bonds. One of the most trusted online platforms to buy corporate bonds is BondsIndia. • Through Mutual Funds: You can also buy corporate bonds through mutual funds or exchange-traded funds (ETFs). This method does not

7. require the investor to have deep knowledge about corporate bonds. While new corporate bonds can be bought by paying the face value of the bond to the company and the broker’s fee, bonds that have already been issued can be bought in the secondary bond market from investors who hold them. The price for these bonds may be higher or lower than the face value of the bond, depending on the financial condition and market reputation of the bond issuing firm.