Practice Quiz

Financial Planner

Category - Investment Planning

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Some bonds are debt obligations issued by state and local governments, others are sold with no coupon at a discount, still others are promissory notes; what type of bond are issued to purchase specific fixed assets that are pledged to secure debt?
  1. Corporate Bonds
  2. Municipal Bonds
  3. Asset-backed Securities
  4. Mortgage pass-through Securities
Explanation
Answer: A - Corporate bonds are issued to purchase specific fixed assets that are pledged to secure debt. These bonds are mainly issued through utility companies which use the proceeds to build power plants. As the asset generates revenue, the revenue generated goes toward retiring the debt and servicing the interest.
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