A large corporation has issued the following securities:commercialpaper, first mortgage bonds, and equipment trust certificates Which ranging of the securities is correctly seated from most secure to teas: secure?
A.
First mortgage bonds equipment trust certificates, commercial paper.
B.
Equipment trust certificates, first mortgage bonds, commercial paper.
C.
Commercial paper fast mortgage bonds, equipment "trust certificates
The ranking of securities in terms of security is determined by the collateral backing each type of instrument and the priority of claims in the event of default. The correct order is as follows:
Equipment Trust Certificates: These are backed by specific physical assets, such as equipment or machinery. The certificate holders have a direct claim on these assets, making them the most secure.
First Mortgage Bonds: These are secured by the corporation's real estate assets. They represent a claim on the property, ensuring a high level of security, but less secure than equipment trust certificates as real estate may fluctuate in value or face delays in liquidation.
Commercial Paper: This is unsecured short-term debt issued by corporations. As it lacks collateral, it is the least secure of the three securities. Investors rely on the issuing corporation's creditworthiness and financial stability.
The distinction in security levels reflects the degree of collateralization and claim priority, ensuring investors are compensated for the relative risk levels.
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