Final answer:
A corporate bond is a type of bond issued by a firm to raise capital. It represents debt for the company and promises to repay the principal amount borrowed and interest payments. Corporate bonds provide investors with a fixed return on their investment.
Step-by-step explanation:
A corporate bond is a type of bond that is issued by a firm to raise capital. It represents a form of debt for the issuing company. The company promises to repay the bondholder the principal amount borrowed, along with periodic interest payments.
For example, if a company issues a $1,000 corporate bond with an annual interest rate of 5% and a maturity period of 5 years, the bondholder will receive an annual interest payment of $50 and the $1,000 principal amount at the end of the 5-year period.
Overall, corporate bonds are a way for companies to borrow money from investors and provide them with a fixed return on their investment.