{"id":53914,"date":"2024-04-16T00:01:17","date_gmt":"2024-04-16T00:01:17","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=53914"},"modified":"2024-04-16T00:01:17","modified_gmt":"2024-04-16T00:01:17","slug":"a-bond-issue-is-broken-up-so-that-some-investors-will-receive-only-interest-payments-while-others-will-receive-only-principal-payments-which-is-an-example-of-________","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/a-bond-issue-is-broken-up-so-that-some-investors-will-receive-only-interest-payments-while-others-will-receive-only-principal-payments-which-is-an-example-of-________\/","title":{"rendered":"A bond issue is broken up so that some investors will receive only interest payments while others will receive only principal payments, which is an example of ________."},"content":{"rendered":"<p>[amp_mcq option1=&#8221;bundling&#8221; option2=&#8221;un-bundling&#8221; option3=&#8221;financial engineering&#8221; option4=&#8221;credit enhancement E. B &#038; C&#8221; correct=&#8221;option2&#8243;]<!--more--><\/p>\n<p>The correct answer is B. un-bundling.<\/p>\n<p>Bundling is the process of combining different assets into a single security. Un-bundling is the opposite of bundling, and it involves breaking up a single security into its component assets.<\/p>\n<p>In the case of a bond issue, un-bundling would involve breaking up the bond into two or more different securities, each of which would pay a different type of payment. For example, one security might pay only interest payments, while another security might pay only principal payments.<\/p>\n<p>Un-bundling can be used to create securities that are more attractive to different types of investors. For example, an investor who is looking for income might be more interested in a security that pays only interest payments, while an investor who is looking for capital appreciation might be more interested in a security that pays only principal payments.<\/p>\n<p>Un-bundling can also be used to reduce risk. For example, if a bond issue is broken up into two securities, each of which pays only interest payments, then the risk of default is reduced for both securities. This is because if the issuer defaults on the bond, then only one of the securities will be affected.<\/p>\n<p>Financial engineering is the process of using financial instruments to create new products or services. Credit enhancement is the process of making a security more attractive to investors by adding a guarantee or other form of protection.<\/p>\n<p>Neither financial engineering nor credit enhancement is directly related to the question of un-bundling.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[amp_mcq option1=&#8221;bundling&#8221; option2=&#8221;un-bundling&#8221; option3=&#8221;financial engineering&#8221; option4=&#8221;credit enhancement E. B &#038; C&#8221; correct=&#8221;option2&#8243;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-53914","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>A bond issue is broken up so that some investors will receive only interest payments while others will receive only principal payments, which is an example of ________.<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/a-bond-issue-is-broken-up-so-that-some-investors-will-receive-only-interest-payments-while-others-will-receive-only-principal-payments-which-is-an-example-of-________\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A bond issue is broken up so that some investors will receive only interest payments while others will receive only principal payments, which is an example of ________.\" \/>\n<meta property=\"og:description\" content=\"[amp_mcq option1=&#8221;bundling&#8221; option2=&#8221;un-bundling&#8221; option3=&#8221;financial engineering&#8221; option4=&#8221;credit enhancement E. 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