Question

Which of the following definitions describes a secured bond?

Multiple Choice

• Secured only by the "full faith and credit" of the issuing corporation.

• Supported by specific assets pledged as collateral by the issuer.

• Matures in installments.

• Matures on a single date.

Answer 1

Answer: Option b.Supported by specific assets pledged as collateral by the issuer.

Name itself gives a hint that "Secured". The investor money is secured with company by pledge of asset.

Thus, Supported by specific assets pledged as collateral by the issuer this definitions describes a secured bond.

Secured only by the "full faith and credit" of the issuing corporation it is a just verbal security. Security should be measured in monetary terms.

Secured bond can mature at installments or at single date as per the clause of the company.