Question

Discuss different types of investment securities concepts and their characteristics

Answer 1

Different types of investment securities are as follows-

A. Equity securities-this type of securities are helpful in acquisitions of shares of the company and this will provide the ownership rights to the shareholders and they will also provide the right to vote in the meetings of the company.

Equity shareholders are generally treated as owners of the company and they will have the residual claim on the Assets of the company. Liability of the equity shareholders are limited in nature.Payment of dividend to equity shareholders is not mandatory.

B. Debt securities-this type of securities are offering with right to receive fixed rate of return in the form of the interest and right to be the creditor to the company and this will have a prior claim on the Assets of the company.

Debt holders are generally issued with a fixed rate of return in any of the circumstances and they do not vote in the meetings of the company.

C. Preference shares-this is a generally considered a mix of Equity and debt because they will be having right to vote in the matters of preference shareholders and they will be having a right to receive fixed rate of dividend.

preference shareholders will be having a prior claim on the assets then equity shareholders of the company.

so these are the common investment securities which are offered in the market and which are to be subscribed by the public.