A fixed-income security is defined as:
A)a debt obligation that pays a fixed rate of return for a one-year period.
B)common or preferred stock that pays a fixed annual dividend.
C)a long-term debt obligation that pays scheduled fixed payments.
D)long-term debt issued solely by a federal or state government.
E)any security originally issued as either debt or equity that pays a fixed, pre-set payment.

Question

Quizplus · Accepted Answer

A fixed-income security is typically a debt obligation that pays regular and predictable fixed payments over a period of time. These payments can be in the form of interest payments or principal repayments. Therefore, option C, which describes a long-term debt obligation that pays scheduled fixed payments, is the best choice. The other options, such as option A (which describes a debt obligation with only a one-year term), option B (which describes a type of equity security), and option D (which specifies that the debt must be issued solely by a government), are not accurate definitions of a fixed-income security. Option E is somewhat vague but may encompass some fixed-income securities.

A Fixed-Income Security Is Defined As