The main difference between an open-end and closed-end mortgage trust indenture is:
A) the mutual fund carries a no load fee.
B) security can be diminished as an open-end trust indenture allows for unlimited bond issuance.
C) security can be diminished as a closed-end trust indenture allows for unlimited bond issuance.
D) the mortgage trust company does not have any security.

Question

Quizplus · Accepted Answer

An open-end trust indenture allows for the issuance of additional bonds in the future without the consent of existing bondholders, which can potentially dilute the security backing for those bondholders. In contrast, a closed-end indenture does not allow for the issuance of additional bonds, thus maintaining the level of security for existing bondholders.

The Main Difference Between an Open-End and Closed-End Mortgage Trust