likaiba

 

6、Which of the following is least likely an example of internal credit enhancement?

A) Bond insurance.

B) Cash reserve funds.

C) Excess servicing spread accounts.

D) Over-collateralization.

likaiba

 

The correct answer is A

Bond insurance is an example of external, not internal, credit enhancement.

likaiba

 

AIM 7: Discuss the securitization process for mortgage-backed securities and asset-backed commercial paper.

1、The typical asset-backed commercial paper (ABCP) securitization:

A) continually purchases assets and issues notes. 

B) trade in active secondary markets. 

C) faces minimal liquidity risk. 

D) involves single-sellers of receivables. 

likaiba

 

The correct answer is A

ABCP trade in illiquid markets, involve multi-sellers and face significant liquidity risk.

likaiba

 

2、Which of the following statements about mortgage-backed securities is FALSE?

A) MBS utilize minimal credit enhancement. 

B) MBS bear minimal credit risk. 

C) CMOs distribute prepayment risk evenly across different tranches. 

D) MBS face significant prepayment risk. 

likaiba

 

The correct answer is C

CMOs distribute prepayment risk differentially across security holders.