An Introduction to Debt Instruments

One of the most important aspects of passing the Series 7 exam is familiarizing yourself with debt instruments. In this blog post, we will discuss the different types of debt instruments and provide examples for each.

We will also explain the key features that investors should look for when purchasing these securities. Understanding debt instruments is critical for anyone looking to become a registered representative or investment advisor!

Treasury securities are one of the most common types of debt instruments, and can be categorized into three main categories: bills, notes, and bonds. Bills are short-term securities that typically have maturities of less than one year.

Notes are intermediate-term securities with maturities ranging from one to ten years, while bonds have longer maturity periods that can last up to 30 years.

Another type of debt instrument that is commonly used in the financial markets is the agency securities, which may include asset-backed securities (ABS) and mortgage-backed securities (MBS). These types of investments are generally issued by government entities or government-sponsored enterprises such as Fannie Mae and Freddie Mac.

Corporate bonds are another common type of debt instrument that may be issued by companies in order to raise funds for various purposes, such as growth and expansion projects. Similar to government securities, corporate bonds have varying term lengths and maturity dates.

One of the more specialized types of debt instruments is municipal securities, which may be divided into three different categories: general obligation (GO) bonds, revenue bonds, and others.

GO bonds are typically backed by the government entity issuing them, while revenue bonds are not directly backed by a government or public entity, but instead by the revenues generated from a specific project or service.

In addition to these different types of debt instruments, there are also a variety of other debt instruments that investors may encounter in the financial markets, including money market instruments such as CDs and bankers’ acceptances, commercial paper, and short-term obligations.

CDs, in particular, are a popular choice for investors looking to earn higher returns while maintaining some safety and liquidity. Commercial paper, on the other hand, is a type of unsecured, short-term debt instrument that is usually issued by large corporations or banks. Short-term obligations, such as Treasury bills, are also commonly used by investors for short-term investing and cash management.

Whether you are preparing for a career in the financial industry or simply want to gain a better understanding of debt instruments, it is important to become familiar with the key features of these securities.

Some key things to consider include the term length, maturity date, and credit rating of each debt instrument. Additionally, it is important to take into account any associated fees or costs that may be involved with purchasing or trading a particular security.

By understanding these key factors, you can make more informed investment decisions and navigate the world of debt instruments with confidence!

If you’re studying this information for the Series 7 exam, be sure to also check out Achievable. Achievable offers free sample Series 7 questions to prepare you for the Series 7 Exam. Good luck on your studies!