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The debt payments
of secured bonds are secured by a pledge of the issuer's assets, typically
shares, a building or land. In the event of a default, the investors would
have a claim on the pledged assets. Conversely, unsecured loans are bonds
not backed by any collateral. In the event of a default, the bondholders
would have a general claim on the issuing company. Due to their higher risk
factor, unsecured loans offer higher coupon rates than secured bonds.
Remarks: Corporate Bonds or loan stocks are long term
fixed interest income debt securities income debt securities issued by
companies. They usually have a lifespan of five years and are redeemable at
par value on maturity. Bond and loan stock issues vary in many ways and have
many optional features. Some are secured by collateral, others are backed by
guarantees; yet others have no collateral support and are only unsecured
promises to pay. In addition, the bond indenture may provide that the bond
may be redeemable at a specified price.
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