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A Debt Security is an investment in the debt or leverage side of a business or government entity. In the event of a bankruptcy, debt securities are given higher priority than equity securities.
The owner of a debt security is interested in a fixed and stable return in the form of periodic interest payment. Typically debt securities mature and at that time the investor is returned a final principal payment.
Synonyms: bond, note, fixed-income
Debt security prices are sensitive to prevailing interest rates and decrease in value when interest rates rise because alternative assets return a higher fixed payment. The opposite is true when interest rates fall.
Liz: In this deck, must I define a
debt security? These days it's like, don't sue me.
Sue: To the former, yes, and to the latter, huh?
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Preferred. Also known as a Preferred Equity or Preferred Stock.
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