CFA Practice Question
______ provide(s) that a bond insurance company will guarantee that principal and interest payments are made in the event that the issuer of the fund defaults.
A. Federal government indentures
B. Debenture agreements
C. Municipal bond insurance
Explanation: The issuer purchases municipal bond insurance for the benefit of the investor and the municipality benefits from lower costs due to lower default risk, which also increases marketability.
User Contributed Comments 7
| User | Comment |
|---|---|
| ahan | What about debenture? Isn't it the way to guarantee the payment due? |
| garachen | a debenture is unsecured |
| ed1564 | You are thinking of the Bond Indenture - which is the contract |
| rrichmondo | Gotta admit I didnt remember that. THis is going to be a tough exam |
| cfaoaw | also known as Monoliner... |
| Insipidity | Was thinking of bond indentures too :( |
| farhan92 | bond insurance company will guarantee it. I took a calculated guess on this. My logic being A would guaranteed by the gov. B by the co which left C |