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Simple English definitions for legal terms
certificated security
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A quick definition of certificated security:
A certificated security is a type of collateral that is given to guarantee the repayment of money or credit extended to a debtor. It can also refer to an instrument that shows ownership rights in a company or government, such as a stock or bond. Essentially, it represents an investment in a common enterprise rather than direct participation in the enterprise. Securities have no intrinsic value in themselves and their value depends on the financial condition or future prospects of the entity that issued them.
A more thorough explanation:
A certificated security is a type of collateral that is given or pledged to guarantee the fulfillment of an obligation. It is an instrument that shows the holder's ownership rights in a company or government, their creditor relationship, or other rights.
Examples of certificated securities include stocks, bonds, and certificates of deposit. These securities represent an interest based on an investment in a common enterprise rather than direct participation in the enterprise. For instance, a stock represents ownership in a company, while a bond represents a loan to a company or government.
The value of a certificated security depends on the financial condition of the issuer. For example, the value of a stock depends on the profitability or future prospects of the company that issued it. The value of a bond depends on the financial condition of the issuer and the interest rate it pays.
Overall, certificated securities are important for investors because they provide a way to invest in companies or governments and earn a return on their investment.