Debt Security

Debt Securities

Any debt issued by a government or corporation that may be traded. That is, the original buyer of the debt security effectively lends the issuer money in exchange for the security, which gives the holder the right to receive interest payments and, at maturity, the principal. The holder may, at his/her/its discretion, sell the security to someone else, who then gains the right to receive interest and principal from the issuer. In general, debt securities are less risky than stocks; their riskiness relative to each other is determined by the creditworthiness of the issuer.

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debt security

A security representing borrowed funds that must be repaid. Examples of debt securities include bonds, certificates of deposit, commercial paper, and debentures.

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Debt security. Debt securities are interest-paying bonds, notes, bills, or money market instruments that are issued by governments or corporations.

Some debt securities pay a fixed rate of interest over a fixed time period in exchange for the use of the principal. In that case, that principal, or par value, is repaid at maturity.

Some are pass-through securities, with principal and interest repaid over the term of the loan. Still other issues are sold at discount, with interest included in the amount paid at maturity.

US Treasury bills, corporate bonds, commercial paper, and mortgage-backed bonds are all examples of debt securities.