Government and government-owned entities issue bonds to fund their expenses. The coupon rates for government bonds are usually lower than those issued by companies. Bonds issued by government and government-owned entities usually have very low or nil credit risk. Companies issue corporate bonds at higher interest rates to compensate for their higher credit risk based on their credit rating. Usually, the coupon rate for companies is pegged to the government bond coupon or yield rate.

The most commonly issued corporate bonds are fixed-rate non-convertible bonds or non-convertible debentures.

On attaining maturity, the company will pay off the face value or the principal amount. However, if you opt for a cumulative interest payment, you will receive both the principal amount and net interest.