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Bonds 107: Secured and Unsecured Bonds

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1.
Unsecured bonds are issued with the issuer's promise to offer stock options in the future.
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False. The sellers do not offer stock options to investors at a later date when issuing unsecured bonds.
2.
Municipal bonds that are not backed by collateral are called _______.
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General obligation bonds. Their collateralized counterparts are called revenue bonds.
3.
Mortgage bonds are backed by _______.
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Real estate. That is why they are called mortgage bonds.
4.
What secures revenue bonds?
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Revenue generated by projects funded by the bonds. This revenue is used to pay interest and principal to investors.
5.
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.