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Answer: When voting common stocks are included in the collateral, the indenture permits the bondholders to vote the stocks
The exception is **D**. Collateral trust bonds are secured by financial assets pledged to a trustee. The pledged collateral may include stocks, bonds, notes, and other securities owned by the issuer. However, bondholders do **not automatically** get voting rights over pledged common stock merely because it is part of the collateral. Voting rights depend on the specific indenture terms, so this is not generally true.
Author: Manit Arora
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Q-1.4. Each of the following is generally true about a collateral trust bond EXCEPT:
A
Collateral trust bond are secured by assets, referred to as collateral, which are pledged to bondholders as security
B
The collateral in a collateral trust bond might include stocks, securities in the issuer’s subsidiary(ies), notes, bonds, or whatever other kinds of obligations owned by the issuer
C
The issuer delivers to a corporate trustee under a bond indenture the securities pledged, and the trustee holds them for the benefit of the bondholders
D
When voting common stocks are included in the collateral, the indenture permits the bondholders to vote the stocks
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