Simple English definitions for legal terms
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A hybrid security is a type of investment that combines features of both debt and equity. It is a financial instrument that represents ownership in a company or government entity, or a promise to repay a loan with interest. Examples of hybrid securities include convertible bonds, preferred stocks, and equity warrants. These investments can offer higher returns than traditional bonds or stocks, but also come with higher risks.
A hybrid security is a type of investment that combines features of both debt and equity securities. It is a financial instrument that can be traded on the market and represents ownership in a company or government entity.
For example, a convertible bond is a type of hybrid security that can be converted into shares of stock. This means that the bondholder has the option to convert their bond into stock at a certain price, giving them the potential to benefit from the company's growth.
Another example of a hybrid security is a preferred stock, which combines features of both common stock and bonds. Preferred stockholders receive a fixed dividend payment, similar to bondholders, but also have the potential to benefit from the company's growth, like common stockholders.
Overall, hybrid securities offer investors a way to diversify their portfolio and potentially earn higher returns than traditional debt or equity securities.