Corporate Bonds

Posts Tagged ‘economics’

Question: Corporation - Day 1 - Zero Assets - Issue Bonds?

Lets assume you start a Corporation. You've filed your articles of incorporation with the State, obtained an EIN from the IRS, and opened a Bank Account for the corporation.

Answer: In theory you could issue bonds, in practice no.

To begin with, there is no market for bonds for a brand new corporation without a track record.

Next, you would have to spend several thousands in order to comply with the rules and regulations of the Securities and Exchange Commission.

Finally, you would have to pay interest rates approaching those wanted by a loan shark.

If you can convince people that your business and business plan are sound you will have more luck seeking angel investors to finance your enterprise.

Hope this helps
Jerry-the-bookkeeper

Outlook For Corporate Bonds

Question: What kind of return do Corporate Bonds usually provide?

If I were to invest, say, $20,000 in Corporate Bonds what kind of return can i expect compared to government securities.
Also, what is the average amount of time that Corporate Bonds take to fully mature?
I'm looking for a somewhat shorter-term, higher risk, higher return type of investment. Do any of you seasoned investors have any great ideas or advice? I'm fairly young (22) so I can handle the risk and am able to recover from losses.
And i already have a Roth IRA, and a small long term investment portfolio, so please, no one tell me to save for retirement. I'm already on it.

Answer: You can get some corporate bond yields at the link below. Corporate Bonds usually take between five and 30 years to mature.

Commercial Paper is shorter term -- but is not high risk, and has lower yields.

Bonds come with a face value of $1000 -- and usually sell in lots of 100 bonds ($100,000 face value). Therefore, you would not be able to put together a well diversified portfolio unless you are able to invest several million dollars.

If you are looking for something with a regular income, I would suggest a high dividend stock or preferred stock. Interst on bonds is taxed at your ordinary income rate -- but income on dividends is taxed at 15%.

Why Do Corporate Bonds Yield More than Treasury Bonds?