Answer-first summary for fast verification
Answer: a) Debentures are unsecured bonds; i.e., they are not secured by a specific pledge of designated property
**Correct answer: A** A corporate debenture is an **unsecured bond**, meaning it is not backed by a specific pledge of designated property. - **A is true**: that is the standard definition of a debenture. - **B is false**: debenture holders do have a general claim on the issuer's assets and earnings, just not a claim secured by specific collateral. - **C is false**: many corporate bonds are debentures. - **D is false**: debentures may still contain protective covenants and provisions designed to protect bondholders.
Author: Manit Arora
Ultimate access to all questions.
Q-1.5. Which of the following is TRUE of a corporate debenture bond?
A
a) Debentures are unsecured bonds; i.e., they are not secured by a specific pledge of designated property
B
b) Debenture bondholders have no claim(s) on the property of the issuer (or its earnings)
C
c) Very few (“almost none”) corporate bonds are debentures
D
d) Debentures are bonds that lack provisions designed to afford protection to bondholders
No comments yet.