Multiple Choice QuestionBonds that are backed by specific collateral that must be forfeited in the event that the issuing firm defaults are called ______.Multiple choice question.unsecured bondsdebentured bondssecured bondscollateral bonds
Question
Multiple Choice QuestionBonds that are backed by specific collateral that must be forfeited in the event that the issuing firm defaults are called ______.Multiple choice question.unsecured bondsdebentured bondssecured bondscollateral bonds
Solution
The answer is "secured bonds".
Step by Step Explanation:
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Unsecured bonds: These are bonds that are not backed by any collateral. They are issued based on the issuer's creditworthiness. So, this option is incorrect.
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Debentured bonds: These are also a type of unsecured bonds where the bondholders are considered as general creditors in case of bankruptcy. So, this option is also incorrect.
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Secured bonds: These are bonds that are backed by specific collateral that must be forfeited in the event that the issuing firm defaults. This matches the description in the question. So, this is the correct answer.
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Collateral bonds: There is no specific type of bond known as "collateral bonds". So, this option is incorrect.
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