Which of the Following Explains Why Debentures Have Higher Required

question 92

Multiple Choice

Which of the following explains why debentures have higher required interest rates than mortgage bonds?

• A)Mortgage bonds are backed by specific assets, in contrast to debentures that are unsecured.
• B)Debentures pay higher coupon payments given their relative higher risk profile due to their unsecured nature.
• C)Debentures have greater potential of loss due to a lack of collateral and thus offer higher coupon payments.
• D)All of the above explain why debentures carry higher interest rates.

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Definitions:

Group Decision Making

The process by which multiple individuals come together to analyze problems, consider options, and agree upon a course of action.

Collaborative Brainstorming

A group creativity technique by which efforts are made collectively to find a conclusion for a specific problem by gathering a list of ideas spontaneously contributed by its members.

Narcissists

Narcissists are individuals characterized by an inflated sense of self-importance, a deep need for excessive attention and admiration, and a lack of empathy for others.

Deindividuation

A psychological state in which an individual loses self-awareness and self-restraint, often in group contexts.