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11. A secured bond is a: A. Treasury bond B. semi-government bond C. convertible bond D. debenture E. floating-rate note.

Question

11. A secured bond is a:

A. Treasury bond
B. semi-government bond
C. convertible bond
D. debenture
E. floating-rate note.

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Solution

A secured bond is a type of bond that is backed by specific assets. If the issuer defaults, the bondholders have a claim on those assets. This reduces the risk for the bondholders, which is why secured bonds often have lower interest rates than unsecured bonds.

Let's go through the options:

A. Treasury bond: This is a type of government bond issued by the U.S. Department of the Treasury. It is not a secured bond because it is backed by the full faith and credit of the U.S. government, not specific assets.

B. Semi-government bond: This is a bond issued by a government agency or a government-sponsored enterprise. Like treasury bonds, these are not secured bonds because they are backed by the government, not specific assets.

C. Convertible bond: This is a type of bond that can be converted into a predetermined amount of the company's equity at certain times during its life. It is not necessarily a secured bond; whether it is secured or unsecured depends on the terms of the bond.

D. Debenture: This is a type of bond that is not backed by specific assets. Instead, it is backed by the general creditworthiness and reputation of the issuer. Therefore, a debenture is not a secured bond.

E. Floating-rate note: This is a bond with a variable interest rate. The interest rate is adjusted periodically based on a reference interest rate. Like convertible bonds, whether a floating-rate note is a secured bond depends on the terms of the bond.

None of the options provided are necessarily secured bonds. The nature of a bond being secured or unsecured depends on the specific terms of the bond, not the type of bond. Therefore, none of the options A-E are correct. A secured bond could be any type of bond that is backed by specific assets.

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