Answer (D) is correct . A mortgage bond is secured with specific fixed assets, usually real property. Thus, under the rights enumerated in the bond indenture, creditors will be able to receive payments from liquidation of the property in case of default. In a bankruptcy proceeding, these amounts are paid before any transfers are made to other creditors, including those preferences. Hence, mortgage bonds are less risky than the others listed.
Answer (A) is incorrect because Income bonds pay interest only if interest is earned.
Answer (B) is incorrect because Debentures are unsecured bonds.
Answer (C) is incorrect because Subordinated debentures are subordinated to other debt.
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