Typically, debentures have higher interest rates than mortgage bonds primarily because mortgage bonds are backed by assets while debentures are unsecured.

Question

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Debentures are not backed by any specific asset or collateral, which makes them riskier than mortgage bonds. Therefore, to compensate for the higher perceived risk, debentures usually offer higher interest rates than mortgage bonds.

Typically, Debentures Have Higher Interest Rates Than Mortgage Bonds Primarily