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Bonds 107: Secured and Unsecured Bonds

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1.
What is a debenture?
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A bond without collateral behind it. Some pay high yields, and many are sold by corporations, but all of them lack collateral.
2.
Although unsecured bonds have no backing, they are protected from default by a promise to pay.
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True. This promise is called "full faith and credit," and many corporations and government units with good credit use it.
3.
Which unsecured bond can be exchanged for stock?
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Convertible bond. This bond has no collateral backing it.
4.
The collateral behind a railroad car purchase may be the railroad car itself.
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True. Railroads commonly sell equipment trust certificates to buy new equipment. Sometimes, the collateral is the item that was bought.
5.
Mortgage bonds are backed by _______.
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Real estate. That is why they are called mortgage bonds.