Explanation:
Collateral trust bonds are secured bonds issued by large companies that are backed by financial securities held by the issuer. These securities can be equities, bonds, certificates, or securities issued by subsidiaries.
Option A is incorrect. In mortgage bonds, a mortgage is kept as collateral. Option C is incorrect. Debentures are unsecured bonds. Option D is incorrect. Senior secured bonds usually require fixed assets and mortgages as collateral.
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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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