External credit enhancement involves a guarantee from a third party. The most common form of external credit enhancement is ________.

Question

Quizplus · Accepted Answer

Bond insurance is the most common form of external credit enhancement and involves a guarantee from a third party, usually an insurance company, to pay the debt service on a bond issue in the event of default by the issuer. A monoline wrap is a form of bond insurance provided by a specialized insurance company, while bond envelope and surety stock are not commonly used terms in the context of credit enhancement.

External Credit Enhancement Involves a Guarantee from a Third Party