Corporate bonds for which no specific assets are pledged as collateral are referred to as _________ bonds.

Question

Quizplus · Accepted Answer

Unsecured bonds are also known as debentures, and they are not backed by any specific collateral. Instead, they rely solely on the creditworthiness of the issuer to repay the debt. This means that if the issuer defaults, investors may not be able to recover their investment. Collateralized bonds, on the other hand, are backed by specific assets, such as property or equipment, that can be seized and sold to repay the debt if the issuer defaults. Indentures refer to the legal agreements that govern bond issuances, and naked bonds are a type of zero-coupon bond that does not pay any interest. Risk-free bonds do not exist, as all investments carry some degree of risk.

Corporate Bonds for Which No Specific Assets Are Pledged as Collateral