Corporate Debt

Lesson

Foreign-issued corporate debt refers to bonds issued by corporations outside the United States. These bonds can provide investors with diversification and potentially higher yields but also come with additional risks, such as currency and political risks.

Practice Question #1

Which of the following risks is unique to investing in foreign-issued corporate debt?

Terms

Foreign-issued bonds:

Debt securities issued by a foreign corporation or government.

Practice Question #2

What is one potential benefit of investing in foreign-issued corporate debt?

Do Not Confuse With

Domestic corporate debt:

Bonds issued by corporations within the United States.

Practice Question #3

Which of the following is NOT a risk associated with investing in foreign-issued corporate debt?

Historical Example

In the late 1990s, a major Asian financial crisis led to significant currency devaluations and economic turmoil in several countries. As a result, many foreign-issued corporate bonds from the affected countries experienced sharp declines in value, highlighting the risks associated with investing in these securities.

Real-World Example

Investors looking for higher yields and diversification might consider purchasing foreign-issued corporate bonds from a well-established European company. While this investment could offer higher returns than domestic bonds, the investor must also consider the risks of currency fluctuations and potential political instability in the region.