10. More on types of bonds Aa Aa E A legal document that details the rights of bondholders and the issuer is called If the legal document just described includes a sinking fund provision, is the bond considered to have more or less default risk, all else being equal? More default risk Less default risk You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each description given in the table that follows: Type of Bond Description These bonds have a claim on assets only after senior debt has been paid in full. These bonds are backed by real estate holdings and equipment, and if a company goes bankrupt, the collateral can be sold off to compensate for the default. These bonds, more so than other collateralized securities, have prior claims over assets. These bonds are not backed by any physical collateral. They are backed by the reputation and creditworthiness of the issuing company. Bond ratings are very important as they are indicators of the bonds' default risk and have a measurable impact on the bond's yield. During an economic recession and in a pessimistic environment, the yield spread between U.S. government bonds and corporate bonds could be than during good economic times