UNSECURED BOND Meaning and
Definition
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An unsecured bond refers to a type of investment security that does not have any specific collateral backing it. It is a debt instrument issued by a corporation or government entity to raise capital, where the issuer promises to pay the bondholder a fixed interest rate over a specific period and return the principal upon maturity. However, unlike secured bonds, unsecured bonds lack specific collateral to guarantee repayment if the issuer defaults.
Investors who purchase unsecured bonds rely solely on the creditworthiness and financial stability of the issuing entity. In the event of default, bondholders have a lower priority claim on the issuer's assets compared to secured bondholders. This means that unsecured bondholders are at higher risk of not receiving full or partial repayment.
Due to the higher risk associated with unsecured bonds, they generally offer higher yields than secured bonds. Yield is the return an investor receives, calculated as a percentage of the bond's price. The yield compensates investors for the increased risk they undertake by investing in unsecured bonds.
Unsecured bonds typically come in various forms, including corporate bonds, municipal bonds, or government bonds. They play a vital role in financing activities by entities, as they allow them to raise funds without having to put up specific assets as collateral. Investors interested in unsecured bonds should carefully assess the financial health and creditworthiness of the issuing entity to make informed investment decisions.
Common Misspellings for UNSECURED BOND
- ynsecured bond
- hnsecured bond
- jnsecured bond
- insecured bond
- 8nsecured bond
- 7nsecured bond
- ubsecured bond
- umsecured bond
- ujsecured bond
- uhsecured bond
- unaecured bond
- unzecured bond
- unxecured bond
- undecured bond
- uneecured bond
- unwecured bond
- unswcured bond
- unsscured bond
- unsdcured bond
