Series 52: 5.4.2. Credit Enhancement

Taken from our Series 52 Top Off Online Guide

5.4.2.  Credit Enhancement

Credit enhancement is a legally binding pledge of financial support coming from a source other than the issuer that virtually guarantees repayment of the bond and serves to improve the creditworthiness of the bond.

An insurance covenant promises one form of credit enhancement through a bond insurance policy that covers the issuer’s debt service obligations. An insured bond issue may receive a higher credit rating, depending on the rating enjoyed by the insurer.

We have also previously discussed advance refunding as a form of early retirement for callable bonds. A new bond is issued to pay off an existing bond at least 90 days in advance of its call date. The money is he

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