Which of the Following Type of Debt Obligation Most Likely

question 9

Multiple Choice

Which of the following type of debt obligation most likely protects bondholders when the assets serving as collateral are non-performing?

• A) Covered bonds
• B) Collateral trust bonds
• C) Mortgage-backed securities

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Definitions:

Life Insurance Policy

A contract between an insurer and an insured, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person.

Bank

A financial institution licensed to receive deposits, offer loans, and provide various financial services to individuals and businesses.

Novation

The act of replacing an old contract with a new one, substituting a new party into an existing agreement.

Mortgage

A legal agreement by which a bank or creditor lends money at interest in exchange for taking title of the debtor's property, with a clause for voiding the agreement upon repayment.