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Bonds 106: The Role of Collateral

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1.
Government collateralized securities are secured by the taxing power of the government.
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False. Government collateralized securities are not secured by the taxing power of the government, but by the collateral itself.
2.
Adding collateral to a security makes it more marketable.
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True. Many investors are attracted to the safety feature provided by collateral.
3.
Loan and debt issuers use collateral to attract investors.
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True. Collateral helps protect against losses from default.
4.
Securities with collateral are more attractive in the secondary market than they would be without collateral.
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True. Collateralized securities are perceived by many investors as safer investments.
5.
In an equipment trust certificate, a trustee holds the title to the collateral.
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True. A third-party trustee holds the title.