Sample Coursework Paper on Debt Securities versus Equity Securities

A viable investment is one that offers the greatest amount of investment for the investors, while maintaining their principal amount. However, consideration should be placed on the value of the investment remaining the same, while returns on the investment through interests, dividends, and profits accruing during the period of the investment (Needles and Powers, 2008). Therefore, an investor with the choice between debt securities and equity securities has to consider all the facts, terms, period of investment, risk, and future value of the investment. Based on these factors, the best investment option for $100,000 would be in debt securities, rather than equity securities.

First, the debt security assures the investors of the reacquisition of their principal amount once the maturity period of the security reaches, as compared to equity security where the principal amount may alter based on its value in the market. Secondly, the debt security offers regular payments annually or bi-annually, as determined by the interest rate being offered, as compared to equity security where the issuer may opt to retain dividends or offer low dividends due to low profits (Needles and Powers, 2008). Third, if the investor acquires a secured debt security, he/she is assured of the reacquisition of his/her principal amount as derived from the sale of the collateral being used to secure the debt security. This is in contrast to equity security where the focus for repayments is first to creditors and supplies, followed by the investors, hence could result in lower value of their principal amount being given. Therefore, based on these benefits of debt securities as compared to the demerits of equity securities, it is advisable for the investor to seek the former as the viable investment option.

References

Needles, B., & Powers, M. (2008). Financial Accounting. Mason, OH: Cengage Learning.