Question

Jamie Lee and Ross were unaware that there was so much to learn about the different types of bonds. Using the information found in the text, compare the three types of corporate bonds: Debenture Bond, Mortgage Bond, and Subordinate Debenture Bond. Which bond investment type would you recommend for Jamie Lee and Ross? Why?

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Debenture Bond	Mortgage Bond	Subordinate Debenture Bond

Answer 1

POD	Debenture bonds	Mortgage bonds	Subordinate debenture bonds
Definition	The term debenture bond refers to debt issued by a company that is not secured by collateral	A mortgage bond is a bond secured by a mortgage or pool of mortgages. These bonds are typically backed by real estate holdings and real property such as equipment	Subordinated debt is a loan or security that ranks below other loans or securities with regard to claims on assets or earnings.
Security	Unlike mortgage bonds, which are backed by physical assets, debentures are unsecured loans.	They are backed by some security	These are unsecured loans.
Repayment priority	There is a prescribed payment structure. Senior debentures are paid before subordinate debts or as per their prescribed time	Mortgage bond yields tend to be lower than corporate bond yields, as the securitization of mortgages makes such bonds safer investments.	Subordinated debt is any type of loan that's paid after all other corporate debts and loans are repaid, in the case of borrower default.
Interest	Comparatively low interest rates than the equity but higher than mortgage bonds	Interest rates are low.	Higher interest rated
Risk	Moderate risk	Risk is very low as there is security backed	Very high risk

Depending upon the requirement of Jamie and Ross they could decide the type of bond, meaning if they have security enough to back their loan , they can prefer mortgage bond as it offers lowest interest rate and if they wants to go for unsecured loan and doesn't mind high cost than they can choose subordinate loans.