A debt security pays
A)a fixed level of income for the life of the owner.
B)a variable level of income for owners on a fixed income.
C)a fixed or variable income stream at the option of the owner.
D)a fixed stream of income or a stream of income that is determined according to a specified formula for the life of the security.

Question

Quizplus · Accepted Answer

A debt security typically pays a fixed stream of income or a stream of income that is determined according to a specified formula for the life of the security. This is why it is considered a fixed income security. Choice A might be true for some types of debt securities, such as bonds with a fixed coupon rate, but not all. Choice B might be true for some types of adjustable rate debt securities, but not all. Choice C is not entirely accurate, as the income stream is usually determined at the issuance of the security and cannot be changed at the option of the owner.

A Debt Security Pays