A corporate bond backed only by a company’s promise to pay is called a ________.

Options

A) debenture bond

B) secured bond

C) convertible bond

D) promissory bond

E) municipal bond

Answer Explanation

Corporate Bond

A bond is a long-term contract under which a borrower agrees to make payments of interest and principal on specific dates to the holders of the bond. It is long-term debt security or long-term promissory note having a maturity period of more than one year.

A corporate bond is a debt instrument used by corporations. The borrower of the securities promises to pay fixed periodic interest till the maturity period and at the end maturity value or face value as well. The interest payment is called coupon payment. In the issuance of a bond the legal document indenture is prepared which specifies the right and duties and all the terms and conditions related to the bonds.

Debenture Bonds are the type of Corporate Bonds that are not backed by Any kind of Collateral. Since debentures have no collateral backing, they must rely on the creditworthiness and reputation of the issuer for support. Both corporations and governments frequently issue debentures to raise capital or funds.