Explanation:
A collateral trust bond is a bond that is secured by a financial asset, such as stock or other bonds (equities and securities), deposited and held by a trustee for the holders of the bond. Because Silver Sun Solar Panel Company lacks fixed assets or mortgages but has equities and securities from other companies, collateral trust bonds are the appropriate secured bond type. Debentures are unsecured bonds, while mortgage bonds are secured by real estate or physical assets.
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Q.27 Silver Sun Solar Panel Company was founded by three engineering students four years ago in the suburbs of Toronto. The company traditionally outsourced the manufacturing of solar panels to a Chinese firm. However, the company has recently decided to go into the solar panel manufacturing business, but they need financing. Currently, the company does not own mortgages or fixed assets but holds equities and securities of other companies. If the company wants to raise capital through secured bond issues, which of the following types of bonds should the firm issue?
A
Mortgage bonds.
B
Collateral trust bonds.
C
Debenture issues.
D
Senior secured bonds.
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