Corporate Bonds
Debt issued by corporations: secured bonds (mortgage bonds, equipment trust certificates) are backed by specific collateral; debentures are backed only by the issuer's credit; subordinated debentures rank below other debt.
Corporate interest is fully taxable at every level, so corporates must out-yield munis and Treasuries of similar maturity. Most exam misses come from the collateral tells: mortgage bonds pledge real property, equipment trust certificates pledge rolling stock (the railroad/airline staple), and collateral trust bonds pledge securities the issuer holds — match the name to its backing, and don’t reach for a secured type when the stem says “no specific asset pledged.” Two near-misses: guaranteed bonds lean on a third party (often a parent), which is a promise, not collateral, so they stay unsecured; and callable or convertible are embedded features layered on any bond, not security types.
Don’t confuse seniority with credit quality: liquidation rank reflects the claim, while coupon and yield reflect default risk, so a high-coupon junk debenture can still outrank a safer, lower-yield issue (see credit risk). Junior subordinated debentures stay above all equity, but a single dollar of unpaid wages and taxes is settled before any bondholder.
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