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Definition of Collateral Trust Certificate

Collateral Trust Certificate is a bond backed by the pledge of securities the issuer owns in another entity.

Applying "Collateral Trust Certificate" to Securities Exams:

When an issuer of debt wants to borrow money through the sale of bonds the issuer may pledge shares or bonds that it owns issued by another company or entity. By pledging the securities as collateral the issuer may be able to borrow the money at a lower interest rate. If the issuer’s credit is poor issuing a collateral trust certificate may be the only way to borrow money at a reasonable rate.

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