Unformatted text preview: projects is used to secure them. Because they are backed with specific collateral, secured bonds are perceived as safer investments than unsecured bonds. Financial assets in the form of a securities portfolio containing stocks and bonds secure collateral trust bonds. 57
57 Types of secured Bond Equipment trust certificates are backed by company equipment such as trucks, airplanes, railroad cars, etc. They are often issued by airlines and railroads that need to finance new purchases of equipment. The equipment bought may be the same equipment that is collateralized. A trustee for the bondholders keeps the title to the equipment. After all the bondholders have been repaid, the trustee then returns the title to the company. Because they are backed with specific collateral, secured bonds are perceived as safer investments than unsecured bonds. Because they are perceived as safer, they typically pay lower interest rates. Secured bonds are favored by those who want to protect their investment capital. 58
58 Classification of Bonds Investors hav...
View Full Document