Equipment trust certificates are backed by physical assets. Mortgage
backed securities are backed by mortgages. Collateral trust bonds are
backed by securities.
Fixed Income MCQ - Fixed Income Section 1
Excess spread is an example of an internal credit enhancement while letter
of credit and surety bond are examples of external credit enhancement.
A security with an original maturity of one year or less is a money market
security. A security with a credit rating of BBB or higher is investment
grade.
The rating below BBB by Standard & Poor’s is known as junk, high yield,
speculative, or non-investment grade.
A sinking fund arrangement allows for the retirement of bond on an annual
basis based on a random drawing. A serial maturity structure, a stated
number of bonds mature and are paid off each year before final maturity.
A term maturity structure allows for one lump sum payment at maturity.
