A corporate bond is a type of debt security issued by a corporation to raise capital. Companies issue these bonds to fund operations, expand, or finance projects. When an investor buys a corporate bond, they are essentially lending money to the company. In return, the company agrees to pay the investor interest, known as the coupon rate, at fixed intervals, and to repay the principal (face value of the bond) at the bond's maturity date.

Corporate bonds are typically issued with fixed interest rates, which remain constant throughout the bond's life. However, there are variations, including floating-rate bonds, where the interest adjusts with market rates, and zero-coupon bonds, which are issued at a discount and pay no periodic interest but return the face value at maturity.

Corporate bonds are generally classified as either investment-grade or high-yield (junk) bonds based on the issuer’s credit rating, which reflects the company's financial stability and likelihood of repaying its debt. Investment-grade bonds are considered safer but offer lower yields, while high-yield bonds come with greater risk and higher returns.

For investors, corporate bonds provide an opportunity to earn steady income, though they involve credit and interest rate risk. Bondholders have priority over stockholders in claims on a company's assets if it goes bankrupt.