What characterizes corporate bonds?

Corporate bonds are debt securities that companies issue to raise funds for various purposes, such as expanding operations, investing in new projects, or refinancing existing debt. The distinguishing feature of corporate bonds is that they can be secured by corporate assets, meaning that in the event of a default, bondholders have a claim on specific company assets as collateral. This backing provides bondholders with additional security and is an essential aspect of how these financial instruments work.

While corporate bonds can be either secured or unsecured, the option highlighting their association with corporate assets best captures the nature of secured corporate bonds. This characteristic is vital for investors, as it offers a degree of protection in case the issuing corporation faces financial difficulties. Other options do not accurately define corporate bonds; for example, not all corporate bonds are exclusively for large investors or require no corporate backing. Therefore, the mention of security by corporate assets is a crucial aspect that highlights the fundamental nature of corporate bonds.