Collateral agreements for a note or bond can:
A) Lower the risk in comparison with unsecured debt.
B) Increase the risk in comparison with unsecured debt.
C) Have no effect on risk.
D) Reduce the issuer's assets.
E) Increase total cost for the borrower.

Question

Quizplus · Accepted Answer

Collateral agreements provide security for lenders by offering a specific asset or set of assets that can be used to repay the debt in the event that the borrower defaults. This decreases the risk associated with the loan and can lead to a lower interest rate for the borrower.

Collateral Agreements for a Note or Bond Can