Fixed-Interest Security

DEFINITION of 'Fixed-Interest Security'

A debt instrument such as a bond, debenture or gilt-edged bond that investors use to loan money to a company in exchange for interest payments. A fixed-interest security pays a specified rate of interest that does not change over the life of the instrument. The face value is returned when the security matures.

BREAKING DOWN 'Fixed-Interest Security'

Fixed-interest securities are less risky than equities, since in the event that a company is liquidated, bondholders are repaid before shareholders. However, bondholders are considered unsecured creditors and may not get any or all of their principal back.

Fixed-interest securities are also subject to interest-rate risk. Since their interest rate is fixed, these securities will become less valuable as rates go up in a rising-interest-rate environment. If interest rates fall, however, the fixed-interest security becomes more valuable.

RELATED TERMS
  1. Two-Step Mortgage

    A mortgage that offers an initial fixed-interest rate for a period ...
  2. Fixed-Period ARM

    An adjustable-rate mortgage (ARM) with an initial fixed-interest-rate ...
  3. Gilt-Edged Securities

    High-grade bonds that are issued by a government or firm. This ...
  4. Gilt-Edged Bond

    A bond issued by the U.K. government at a fixed interest rate ...
  5. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or ...
  6. Investment Product

    A product purchased with the expectation of earning a favorable ...
Related Articles
  1. Markets

    Comparing Debentures And Bonds

    Debentures and bonds are debt instruments that companies issue to raise capital beyond their normal cash flows.
  2. Markets

    What's a Debt Security?

    A debt security is a financial instrument issued by a company (usually a publicly traded corporation) and sold to an investor.
  3. Markets

    Debentures

    Learn more about this type of debt instrument.
  4. Managing Wealth

    Understand the Security Types of Corporate Bonds

    Any investor should be aware of the different security types regarding corporate bonds as well as the direct correlation to potential recovery rates.
  5. Managing Wealth

    Junk Bonds: An Investment Opportunity in the Current Low-Interest Environment

    Investors are chasing returns in the current low-interest environment. Corporate higher-yielding bonds may provide an interesting investment opportunity.
  6. Markets

    Savings Bonds Vs. CDs: Which Is Better in 2016?

    Understand what a savings bond is, what a CD is and what sets them apart from each other. Learn why a savings bond is the right investment for 2016.
  7. ETFs & Mutual Funds

    How Interest Rates Affect Mutual Funds

    Find out how changing interest rates impact mutual funds, including bond and money market funds, and how higher rates can discourage investors.
  8. Markets

    Why Companies Issue Bonds

    When companies need to raise money, issuing bonds is one way to do it. A bond functions like a loan between an investor and a corporation.
  9. Markets

    Corporate High-Yield Bonds vs. Equities

    Equities and corporate bonds often play a significant role regarding the diversification of an investor's portfolio. We put both asset classes in contrast.
  10. Markets

    Understanding Financial Instruments

    Financial instrument is a general term used to describe a monetary asset.
RELATED FAQS
  1. How would inflation affect individuals who loan money to growing businesses at fixed-interest ...

  2. What are some examples of debt instruments?

    Learn about the common types of debt instruments used by individuals, businesses and governments to raise capital and generate ... Read Answer >>
  3. What is the difference between a debenture and a bond?

    Learn how to differentiate between debentures and bonds, two types of debt securities that can be issued by a government ... Read Answer >>
  4. How risky is it to enter into a debenture agreement?

    Understand the nature of debenture agreements and the inherent risks and clauses that may provide additional protection for ... Read Answer >>
  5. What are the differences between preference shares and debentures?

    Learn why preference shares are equity securities and debentures are debt securities. Understand the differences between ... Read Answer >>
  6. How is a debenture stock different from a regular debenture?

    Learn to differentiate between standard debentures and debenture stocks, which are equities that act more like preferred ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center