What is a characteristic of corporate bonds?

Corporate bonds are debt securities issued by corporations to raise capital for various purposes, such as financing operations, expanding business, or refinancing existing debt. One key characteristic of corporate bonds is that they can be secured by company assets. This means that in the event of default, bondholders may have a claim on specific assets of the corporation, which provides a level of security for investors. This characteristic can make corporate bonds more attractive relative to unsecured bonds, as it reduces the risk associated with the investment.

The other options highlight characteristics that do not pertain to corporate bonds. For example, they are not issued by governments, so the connection to government bonds is not relevant. Corporate bonds also typically have longer maturities than 3 months; many have terms that range from a few years to several decades. Lastly, while corporate bonds are subject to credit risk—reflecting the possibility that the issuing company may default—indicating that they do not fall under the category of investments that are entirely free from credit risk.