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Fixed interest securities


Those shares or debentures which carry a fixed rate of interest. The rate on a debenture is often lower than on a fixed interest share, e.g. preference share, because the fact that a debenture is secured makes it a less risky a debenture is secured makes it a less risky shares are normally included in this group, they are not securities as, unlike debentures, bonds, etc., the capital outlay is not secured in any way. The price of fixed interest securities quoted on the Stock Exchange will mainly be determined by prevailing interest rates and will tend to settle at a level such that the actual interest or dividend paid will, when related to that price, approximate to the current rate ruling in the market. Variations that occur will be due to the extent of the risk attached to the capital itself and, in the case of preference shares, the probability of dividends actually being paid out.

Reference: The Penguin Business Dictionary, 3rd edt.