Glossary continued Fixed income security/securities Inflation Risk A loan in the form of a security, usually issued by a The rate of increase in the cost of living. Inflation is The chance that an investment’s return will be different government or company, which normally pays a fixed usually quoted as an annual percentage, comparing to what is expected. Risk includes the possibility of rate of interest over a given time period, at the end of the average price this month with the same month a losing some or all of the original investment. which the initial amount borrowed is repaid. year earlier. Yield (income) Government bonds Investment grade bonds Refers to the income received from an investment and Fixed income securities issued by governments, that Fixed income securities issued by a company with a is usually expressed annually as a percentage based normally pay a fixed rate of interest over a given time medium or high credit rating from a recognised credit on the investment’s cost, its current market value or period, at the end of which the initial investment rating agency. They are considered to be at lower risk face value. is repaid. from default than those issued by companies with lower credit ratings. Default means that a company High yield bonds or government is unable to meet interest payments or Z Fixed income securities issued by companies with a low repay the initial investment amount at the end of a credit rating from a recognised credit rating agency. security’s life. They are considered to be at higher risk of default than better quality, ie higher-rated fixed income securities Maturity but have the potential for higher rewards. Default The length of time until the initial investment amount means that a company or government is unable to of a fixed income security is due to be repaid to the meet interest payments or repay the initial investment holder of the security. amount at the end of a security’s life. 14