Which debt instrument allows a company to take possession of an asset and pay for it over time?

Which debt instrument allows a company to take possession of an asset and pay for it over time?

• A. Mortgage bonds
• B. Equipment Trust Certificates
• C. Debentures
• D. Subordinated debentures

Answer: (B)

Equipment Trust Certificates are built around financing a specific asset by creating a trust that buys the equipment and then issues certificates to investors. The company can take immediate possession and use the asset, while paying for it over time through lease or debt service funded by the trust. The asset itself serves as collateral, and the trustee can repossess if payments stop. This setup is distinct from mortgage bonds (secured by real estate), debentures (unsecured), or subordinated debentures (lower-priority unsecured). So the instrument that lets a company take the asset now and pay over time is Equipment Trust Certificates.

Equipment Trust Certificates are built around financing a specific asset by creating a trust that buys the equipment and then issues certificates to investors. The company can take immediate possession and use the asset, while paying for it over time through lease or debt service funded by the trust. The asset itself serves as collateral, and the trustee can repossess if payments stop. This setup is distinct from mortgage bonds (secured by real estate), debentures (unsecured), or subordinated debentures (lower-priority unsecured). So the instrument that lets a company take the asset now and pay over time is Equipment Trust Certificates.