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 are traded in the bond markets based on investors' belief that the issuer will not default on the repayment. These bonds have no collateral and usually offer higher yields. 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 considered the riskiest of all corporate bonds and thus offer the highest interest rates. Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true? U.S. government bonds usually have the lowest yields in the bond markets. BBB bonds usually have the lowest yields in the bond markets. In 2008, the United States began to witness one of the worst recessions since the 1930s. The collapse of the housing bubble in 2006 led to a massive decline in real estate prices, affecting consumers and institutions, especially banking and financial entities. Severe liquidity shortfalls in the United States as well as other global markets led to a serious credit crisis. During the credit crisis of 2008-2009, several banks and other businesses went through a reorganization process or were forced to liquidate. Consider the following example: In May 2009, General Motors started closing 2,600 of its retail outlets and finally filed for bankruptcy in June. It emerged from the bankruptcy protection by July 2009, after it received funding from the U.S. government, the Canadian government, United Automobile Workers Union, and GM bondholders. Source: Farfan, Barbara. "General Motors Chapter 11 Bankruptcy Overview and Details." About.com, Retail Industry. About.com, n.d. Web. August 31, 2010. http://retailindustry.about.com/od/americanretailhistory/a/GM_chapter_11_bankruptcy_details.htm. This is an example of: Liquidation Reorganization