What is a key characteristic of corporate bonds?

A key characteristic of corporate bonds is that their value is closely tied to the fiscal health of the issuing company. This means that the bond's credit rating and the likelihood of the company being able to meet its debt obligations are critical factors in determining the bond's market value. If a company is performing well financially, its bonds are more likely to retain value or appreciate. Conversely, if the company faces financial difficulties, the value of its bonds can decrease significantly as investors perceive higher risk.

In contrast, options such as the guarantee of increasing value or the assertion that corporate bonds are risk-free do not accurately describe corporate bonds, as they are subject to market fluctuations and economic factors. Furthermore, corporate bonds do not provide ownership stakes in the company; ownership comes from purchasing equity securities, such as stocks.