Security → Debt → G-Sec & Bonds

Question 1

What is a security in the financial world?

Answer 1

A security is a financial instrument (like a certificate or document) that represents ownership or debt, indicating the holder is entitled to receive a specific amount of money at a future date.

Question 2

What are the two main categories of debt instruments?

Answer 2

Short-term (maturities less than one year)
Long-term (maturities longer than one year)

Question 3

Provide three examples of short-term government debt instruments.

Answer 3

Treasury bills
Cash Management Bills
Short-term G-Secs (those with a maturity of less than a year)

Question 4

Why do government debt instruments typically have lower interest rates than corporate debt instruments?

Answer 4

Government debt is considered a safer investment because governments are less likely to default on their loans compared to corporations.

Question 5

What factors influence the interest rate on a corporate debt instrument?

Answer 5

Company’s financial health and credit rating
Overall market interest rates
The length of the maturity period