Which of the following is a type of external credit enhancement?
A) Covenants
B) a surety bond
C) overcollaterization

Question

Quizplus · Accepted Answer

A surety bond is a form of external credit enhancement where a third party, the surety, agrees to be responsible for the debt in case of default by the borrower. Covenants and overcollaterization, on the other hand, are internal credit enhancements where the borrower agrees to certain terms and conditions or pledges additional collateral to strengthen the creditworthiness of the bond.

Which of the Following Is a Type of External Credit