Listen to a Business English Dialogue about Debt security
Aaron: Hey Stella, do you know what a debt security is?
Stella: Yeah, I think it’s a financial instrument that represents money borrowed by one party from another, with a promise to repay the borrowed amount along with interest.
Aaron: Exactly. Debt securities can take various forms, such as bonds, Treasury bills, or promissory notes.
Stella: How do debt securities differ from equity securities?
Aaron: While debt securities represent a loan that needs to be repaid, equity securities represent ownership in a company, entitling the holder to a share of the company’s profits and assets.
Stella: Are debt securities considered safer investments compared to equity securities?
Aaron: Generally, yes. Debt securities typically offer fixed interest payments and a predetermined repayment schedule, providing more predictable returns compared to the potentially volatile returns of equity securities.
Stella: Can you give an example of a debt security?
Aaron: Sure, a corporate bond is a common type of debt security where a corporation borrows money from investors by issuing bonds with a promise to repay the principal amount plus interest at a future date.
Stella: How are debt securities traded in the financial markets?
Aaron: Debt securities can be bought and sold on the bond market, where investors trade existing bonds among themselves, or they can be issued directly by governments or corporations through public offerings.
Stella: Thanks for the information, Aaron. Debt securities seem like an important component of the financial system.
Aaron: No problem, Stella. They play a crucial role in providing financing for governments, businesses, and individuals while offering investors a way to earn a return on their investments.