Instruments which provide payments to holders of bonds in the event of default are known as ________.
A)collateralized bond obligations
B)tertiary payment devices
C)credit default swaps
D)mortgage-backed securities

Question

Quizplus · Accepted Answer

Credit default swaps are instruments that provide payments to holders of bonds in the event of default. They are a type of insurance contract where the buyer pays a premium to the seller in exchange for protection against the risk of default. If the issuer of the bond defaults, the buyer of the credit default swap receives a payout from the seller, which can help to offset the losses from the default. Collateralized bond obligations, mortgage-backed securities, and tertiary payment devices are all different types of financial instruments that are not specifically designed to provide protection against defaults.

Instruments Which Provide Payments to Holders of Bonds in the Event