Which of the following types of bonds is backed by a portfolio of stocks and bonds owned by the issuer?

The correct choice is a bond that is backed by a portfolio of stocks and bonds owned by the issuer. In this case, collateral trust bonds are specifically designed to be secured by financial assets, such as other bonds or stocks, which the issuer holds. This backing provides assurance to bondholders that there is a tangible source of collateral that can be claimed in the event of a default.

Collateral trust bonds are an important financial instrument because they allow issuers to leverage their existing investments to raise capital, while also providing bondholders with additional security through the pooled assets. This differentiates them from other types of bonds, such as secured bonds, which are backed by specific physical assets, and mortgage bonds, which are secured by real estate loans. Equipment bonds relate to financing specific machinery or equipment, thus not being backed by a broader portfolio of financial instruments.

Understanding this type of bond and the nature of its backing is crucial for both investors assessing risk and issuers seeking to finance their operations with backed securities.