SIE Exam Question 956: Answer and Explanation

Question: 956

Which of the following is a characteristic of a debenture bond?

• A. Debenture bonds are secured bonds.
• B. Debenture bondholders have the same rights as general creditors.
• C. To account for the lower default risk, debenture bonds will have lower yields to maturity than secured bonds issued for the same term by the same issuer.
• D. All of the above are correct.

Correct Answer: B

Explanation:

Debenture bonds are unsecured bonds, and debenture bondholders have the same rights as general creditors. To account for the higher default risk, debenture bonds will have higher yields to maturities than secured bonds issued for the same term by the same issuer.