Series 7 practice questioneasyDebt Securities — Corporate Bonds — Secured vs Unsecured
Which type of corporate bond is backed by specific assets of the issuing corporation?
- ADebenture
- BSubordinated debenture
- CMortgage bond✓ Correct answer
- DIncome bond
Explanation
Why C — Mortgage bond
A mortgage bond is a secured bond backed by specific real property (real estate) pledged as collateral. If the issuer defaults, bondholders have a claim on the pledged property. Debentures, by contrast, are unsecured bonds backed only by the issuer's general creditworthiness and ability to pay. Mortgage bonds are considered safer than debentures.
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