INTRODUCTION TO DEBT SECURITIES

A debt security is evidence of a debt. It is sold to an investor with the promise that it will be paid back with interest at the end of a specified period. The debt's issuer—a corporation or a unit of government—uses the proceeds of its sales to finance various projects.

Some debts last as little as one day. Others last as long as fifty years.

Some are secured by collateral such as revenue or physical assets.

Some are unsecured and are backed only by the creditworthiness of the company or government unit.

All debt securities are issued with a fixed face amount (par). However, the issuer often sells them at a discount (below par). This gives the investor extra incentive to purchase the issue. For example, a debt can be given a value of $500 but be sold for only $450.

This tutorial provides a general look at the four types of debt securities:

Corporate Bonds Features of Corporate Bonds Types of Corporate Bonds Municipal Bonds U.S. Government Securities Marketable Securities The Non-Marketable Treasury Securities Money Market Securities Money Market Investments Debt Securities are Investments in Loans

We will introduce each type and then follow it with several examples.

To begin reading about the first class of debt securities, please click the Next button.