Understanding Debt Securities: How Are These Financial Assets Beneficial for Investors?
Debt securit ies refer to financial assets that are bought or sold betwe e n two parties with basic terms defined. The se financial instruments hold a promise from the issuer to pay the holder a specified amount at a particular date , which is when the debt security matures. They are negotiable assets which means their ownership can be transferred from one party to another easily. Government bonds , certificate of deposit, mortgage-backed securities, preferred st ock, and municipal bond s are some of the popular examples of debt securities . How does debt security work? Debt securities are created when one party lends money to another. For instance, corporate bonds are types of financial instruments that are issued by corporations and sold to investors. Mostly investors return money to the organizations in return for a pre-established number of interest payments along with the return of their principal upon the bond ’ s maturity. Similarly, govern...