Debt issued by a trustee to purchase airplanes that will be leased to an airline would be classified as which of the following?

Question

Quizplus · Accepted Answer

The type of debt described in the question is an equipment trust certificate. This is a type of bond that is issued by a trustee and is secured by the airplanes that are purchased with the proceeds of the bond. The airplanes are then leased to an airline, which generates the cash flows to repay the bondholders. The trustee holds the title to the airplanes until the bond is repaid.

Debt Issued by a Trustee to Purchase Airplanes That Will