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.

  1. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  2. Security

    A financial instrument that represents an ownership position ...
  3. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  4. Face Value

    The nominal value or dollar value of a security stated by the ...
  5. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  6. Gilt-Edged Bond

    A bond issued by the U.K. government at a fixed interest rate ...
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