2.8. Types of Secured Bonds Flashcards
1
Q
What are Secured bonds?
A
They are backed by property or some other real asset, such as physical equipment, that serves as collateral for the loan. In the event of a default, the property can be foreclosed and sold to repay the bond.
2
Q
Why are secured bonds considered to be high-grade investments?
A
They are paid off first, ahead of all other bondholders.
3
Q
Why are secured bonds safer than unsecured bonds, but pay a lower yield?
A
Because they are backed by a physical property they are safer than unsecured bonds therefore, they do not need to offer a higher interest rate to attract people.
