Downing, Inc., issues bonds to purchase new machinery for its factories.These bonds are secured by the machinery purchased with the proceeds of the bond issue.These are ____ bonds.

Question

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Mortgage bonds are secured by specific assets of the company, in this case the machinery purchased with the proceeds of the bond issue. Debenture bonds are unsecured and not backed by any specific asset. Convertible bonds allow the bondholder to convert the bond into a predetermined number of shares of stock. Indenture refers to the written agreement between the bond issuer and bondholders, outlining the terms of the bond issue. Sinking fund refers to a requirement that the issuer set aside funds periodically to retire the bonds at maturity.