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LSDefine
Simple English definitions for legal terms
redeemable security
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A quick definition of redeemable security:
A redeemable security is something that you can use to guarantee that someone will pay you back money that you lend them. It can also be something that shows you own a part of a company or that you have a right to buy something in the future. It's like a special piece of paper that represents something else that has value.
A more thorough explanation:
A redeemable security is a type of financial instrument that can be redeemed or bought back by the issuer at a specific time or date. It is a type of security that gives the holder the right to receive their investment back, along with any interest or dividends earned, at a predetermined time.
For example, a company may issue redeemable bonds that can be bought back by the company after a certain number of years. The bondholder will receive their initial investment back, along with any interest earned, when the bond is redeemed.
Another example of a redeemable security is a callable preferred stock. The company can call back the stock at a specific time and pay the holder the stock's face value plus any dividends earned.
Redeemable securities provide investors with a sense of security, knowing that they will receive their investment back at a specific time. It also allows issuers to manage their debt and equity more effectively.