Which of the following explains why debentures have higher required interest rates than mortgage bonds?
A) Mortgage bonds are backed by specific assets, in contrast to debentures that are unsecured.
B) Debentures pay higher coupon payments given their relative higher risk profile due to their unsecured nature.
C) Debentures have greater potential of loss due to a lack of collateral and thus offer higher coupon payments.
D) All of the above explain why debentures carry higher interest rates.
Correct Answer:
Verified
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