Companies raise cash through corporate bonds for various objectives, like expanding their operations or refinancing debt. Corporate bonds have a higher interest rate compared to government bonds simply because they involve risk with their corporate issuers.

• Investment Grade Bonds: They are those issued by companies that have good credit ratings, meaning they possess top-notch financial health. Returns are a little lower but less risk in terms of offering.
• Junk bonds or High-Yield Bonds: These are the bonds that have been issued by firms with a bad credit rating. Due to such an explanation, they pay a higher rate of interest in order to make an offer to the investors in terms of compensating them for more risk of a bond's failure. In general, investors who have an interest in earning a higher yield demand such bonds.