Definitions And Examples Of A Debenture

2287 Words Sep 30th, 2016 10 Pages
1.) Definitions and Examples.
1.1.) Annuity: “An annuity is the payment or receipt of equal cash flows per period for a specified amount of time” (Moyer, 2015). The term annuity refers to a financial contract that is written by an insurance company giving room for a series of guaranteed payments, it can either be for a specific period of time or even for the lifetime of one or more individuals. For example, regular deposits to a savings account, monthly insurance payments and pension payments, and monthly home mortgage payments.

1.2.) Debenture: “Issues not secured by specific assets are called debentures” (Moyer, 2015). A debenture is a term that refers to a type of debt instrument that is usually not secured by any physical assets or collateral. However, they are backed only by the general reputation and creditworthiness of the issuer. It is frequently issued by both corporations and governments to secure capital. For example, treasury bonds, and treasury bills are a government debenture.

1.3.) Risk: Risk is “the possibility that actual future returns will deviate from expected returns” (Moyer, 2015). Risk is the likelihood of gaining or losing something of value such as physical health, social status, and financial wealth. For example, gambler is willing to bet with all his salary, in this case the gambler 's choice is a risk in that he could lose all his salary in the bet.

1.4.) Primary market: “An investor who purchases new securities is participating in a primary…
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