CFA Practice Question

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
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