Choose the best statement:
A) Mortgage bonds and debentures do not differ because they are both debt.
B) In the event of bankruptcy, debenture holders get paid after the claims of preferred shareholders.
C) Mortgages are secured by claims on specific real assets while debentures are not.
D) Debentures are secured by claims on specific real assets while mortgages are not.

Question

Quizplus · Accepted Answer

This statement correctly differentiates between mortgages and debentures, as mortgages are secured by specific real assets (such as a house), while debentures are unsecured. Option A is incorrect because while both are forms of debt, they differ in terms of their security. Option B is incorrect because preferred shareholders have a higher claim than debenture holders in the event of bankruptcy. Option D is also incorrect as it inaccurately states that debentures are secured by real assets, which is not the case.

Choose the Best Statement