Help
Course Catalog > Bonds > 100
Bonds 106: The Role of Collateral

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
If the issuer of a collateralized debt security defaults, _______.
Choose wisely. There is only one correct answer.
The investor can seize or sell the collateral. The collateral must be forfeited to the investor in lieu of the normal bond payments.
2.
Government collateralized securities are secured by the taxing power of the government.
Choose wisely. There is only one correct answer.
False. Government collateralized securities are not secured by the taxing power of the government, but by the collateral itself.
3.
Securities without collateral have higher credit ratings than those with collateral.
Choose wisely. There is only one correct answer.
False. Securities without collateral are given lower credit ratings than those with collateral.
4.
If a revenue municipal bond defaults, investors do not receive their principal back from the bond.
Choose wisely. There is only one correct answer.
True. That is because payment normally comes from various revenues, which may not be there in the event of default.
5.
Loan and debt issuers use collateral to attract investors.
Choose wisely. There is only one correct answer.
True. Collateral helps protect against losses from default.