Definition of Debt security:
Unlike equity investments, in which the return earned by the investor is dependent on the market performance of the equity issuer, debt instruments guarantee that the investor will receive repayment of their initial principal plus a predetermined stream of interest payments. Of course, this contractual guarantee does not mean that debt securities are without risk, since the issuer of the debt security could declare bankruptcy or default on their agreements.
Debt security refers to a debt instrument—such as a government bond, corporate bond, certificate of deposit (CD), municipal bond, or preferred stock—that can be bought or sold between two parties and has basic terms defined, such as notional amount (the amount borrowed), interest rate, and maturity and renewal date. Debt securities also include collateralized securities, such as collateralized debt obligations (CDOs), collateralized mortgage obligations (CMOs), mortgage-backed securities issued by the Government National Mortgage Association (GNMA), and zero-coupon securities.
Debt instrument such as a bond, debenture, or promissory note which is issued with a promise of repayment on a certain date at a specified rate of interest.
How to use Debt security in a sentence?
- Federal agents raided the headquarters of Diamond Financial Services for allegedly falsifying documents that overstated the value of its assets leading to the conclusion that its debt security to investors and creditors is at risk of being worth nothing at all.
- The interest rate for a debt security will depend on the perceived creditworthiness of the borrower.
- Unlike equity securities, debt securities require the borrower to repay the principal borrowed.
- The debt security was entered into with the intention of being a loan to the company so we felt bad about wanted to cash it out.
- We had a lot of debt security , which was really great for us and allowed us to do a lot of new things.
- Debt securities are financial assets that entitle their owners to a stream of interest payments.
- Bonds are a common type of debt security, such as government bonds, corporate bonds, municipal bonds, collateralized bonds, and zero-coupon bonds.
Meaning of Debt security & Debt security Definition