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What is the difference between a secured bond and a debenture bond? Respond using at least...

What is the difference between a secured bond and a debenture bond? Respond using at least one internet resource. Explain why a bond may sell at a premium.

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Answer #1

The bonds are secured by the collateral assets i.e. the assets are pledged as security that if the company fails to pay the principle and the interest on the bond within stipulated time, the holders could discharge their debts by seizing and selling the company's pledged assets.

The debentures are the debt security issued by a company which is not secured by any specified assets, but it denotes a general credit of the company.

A bond can be sold at a premium when it offers a coupon rate that is higher than prevailing market interest rates. Therefore, the investors would pay more for the bonds if they are provided with a higher yield on the said bond.

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