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?

Less default risk

More 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:

Description

Type of Bond

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.

These bonds are considered the riskiest of all corporate bonds and thus offer the highest interest rates.

The California Pollution Control Financing Authority $($CPCFA$)$ has a pollution control tax$-$exempt financing program. This program allows California businesses to get financing for the acquisition, construction, rehabilitation, and equipping of their facilities for pollution control, waste disposal, waste recovery, and other activities conducted in the public$$s interest.

Such bonds are called development or pollution control bonds. Development bonds have interest rates as corporate bonds.

Based on your understanding of bond ratings and bond$-$rating criteria, which of the following statements is true?

During a period of economic growth and in an optimistic environment, the yield spread between U$.$S$.$ government bonds and corporate bonds will be higher than during an economic recession and a pessimistic environment.

During an economic recession and in a pessimistic environment, the yield spread between U$.$S$.$ government bonds and corporate bonds will be higher than during good economic times.