The bond issuer must give
this money or physical assets to investors if the bond defaults. A
secured bond ensures the bondholder that the principal on the bond
will be paid. Corporate bonds and municipal bonds may be secured or
unsecured. Federal government bonds, however, are unsecured.
Unsecured bonds are called debentures.
Instead of
securing them with some kind of collateral, the issuer "backs" them
with its creditworthiness. Many consider the creditworthiness of
the federal government to be the best there is. This is why U.S.
Government securities are very popular among investors.
Next, you will learn about some ways to defer or even avoid
taxes on bonds.
