SIE (Securities Industry Essentials) Practice Exam

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Nationwide just wrote an unsecured promise to pay the principal of its loan without any pledge of property. Which best describes the corporate debt security that they have?

Bond
Debenture
Note
Certificate of Deposit

The correct answer is: Debenture

A Debenture is a corporate debt security that is not secured by any specific assets, unlike a Bond which is backed by collateral. Therefore, Nationwide's unsecured promise to pay back its loan would be classified as a Debenture. Option A, Bond, would be incorrect as it suggests that the loan is secured, while Option C, Note, refers to a shorter-term debt security. Option D, Certificate of Deposit, is also incorrect as it typically applies to deposits made by customers and not loans taken out by corporations.