Question 1

When unamortizing assets are securitized, the composition of the collateral is fixed over the life of the structure, all principal received by the trust is paid out to the bond classes and the securitization is said to be a self-liquidating structure.

Accepted Answer

A) True 
 B)False

Question 2

Uncommon forms of internal credit enhancement are senior/subordinate structures, overcollateralization, and reserve funds.

Accepted Answer

A) True 
 B)False

Question 3

By making financial assets tradable in this way, securitization ________.

Accepted Answer

A)   increases agency costs, thereby making financial markets more efficient.
B)   worsens liquidity for the underlying financial claims, thereby reducing liquidity risk in the financial system.
C)   reduces agency costs, thereby making financial markets more efficient.
D)   improves liquidity for the underlying financial claims, but increases the bankruptcy risk in the financial system.E) A) and D)
F) B) and C)

Question 4

The collateral in a securitization can be classified as either amortizing or nonamortizing assets.

Accepted Answer

A) True 
 B)False

Question 5

A security created by pooling loans (other than residential prime mortgage loans)  is referred to as ________.

Accepted Answer

A)   a residential-backed security (RBS) .
B)   a mortgaged-backed security (MBS) .
C)   an asset-backed security (ABS) .
D)   a prime mortgage-backed security (PMBS) .E) C) and D)
F) B) and D)

Question 6

The collateral in a securitization can be classified as either amortizing or nonamortizing assets. Describe and contrast amortizing assets with nonamortizing assets.

Accepted Answer

Amortizing assets are loans in which the...

Question 7

Which of the below statements is TRUE?

Accepted Answer

A)   The Small Business Association (SB
A)   is not an agency of the U.S. government empowered to guarantee loans made by approved SBA lenders to qualified borrowers.
B)   Most SBA loans make monthly payments consisting only of interest payments.
C)   Student loans are made to cover college costs (undergraduate, graduate, and professional programs such as medical and law school)  and tuition for a wide range of vocational and trade schools.
D)   The cash flow for senior citizen loans involve three periods with respect to the borrower's payments: deferment period, grace period, and loan repayment period.E) A) and B)
F) A) and C)

Question 8

The competitive transition charge (CTC)  is effectively a legislated asset and is the result of the movement to make the electric utility industry more competitive by deregulating the industry. In regards to CTC, which of the below statements is FALSE?

Accepted Answer

A)   The CTC is collected by the utility over an unknown period of time.
B)   Because the state legislature designates the CTC to be a statutory property right, it can be sold by a utility to an SPV and then securitized.
C)   It is the legislative designation of the CTC as an asset that makes rate reduction bonds different from the typical asset securitized.
D)   The CTC is initially calculated based on projections of utility usage and the ability to collect revenues.E) None of the above
F) B) and C)

Question 9

Because there are several third parties involved in a securitization (e.g., bond insurer, servicer, a trustee, issuer's counsel) and they all play an important role, the rating agency will investigate all of them to determine their ability to perform.

Accepted Answer

A) True 
 B)False

Question 10

A credit card receivable is a nonamortizing asset and therefore has a revolving structure. In regards to the lockout period, which of the below statements is FALSE?

Accepted Answer

A)   During the lockout period the principal payments made by credit card borrowers comprising the pool are retained by the trustee and reinvested in additional receivables to maintain the size of the pool.
B)   The lockout period can vary from 18 months to 10 years.
C)   During the lockout period, the cash flow that is paid out to the bond classes is based on finance charges collected and fees.
D)   The lockout period is followed by the principal amortization period, when the interest is no longer reinvested but paid to bondholders.E) A) and B)
F) A) and D)

Question 11

Few securitization transactions that employ internal credit enhancements follow a predetermined schedule that prioritizes the manner in which principal and interest generated by the underlying collateral must be used.

Accepted Answer

A) True 
 B)False

Question 12

When nonamortizing assets are securitized, there is a lockout period or revolving period where all principal received is used to sell old collateral.

Accepted Answer

A) True 
 B)False

Question 13

The cash flow for auto loan-backed securities consists of regularly scheduled monthly loan payments (interest and scheduled principal repayments) and any prepayments.

Accepted Answer

A) True 
 B)False

Question 14

In the creation of an ABS, which of the below statements is FALSE?

Accepted Answer

A)   There is a type of securitization transaction involving a conduit that buys the loans and securitizes them.
B)   The originator of the loan is the seller of the loan.
C)   The originator of the loan is always the issuer of the loan.
D)   The SPV in a securitization is referred to as the "issuer" or "trust" in the prospectus.E) B) and D)
F) A) and D)

Question 15

Two of the five of largest sectors within the ABS market that are NOT backed by real estate mortgage loans include: ________.

Accepted Answer

A)   rate reduction stocks and student loan-backed securities.
B)   large business administration loan-backed securities and credit card receivable-backed securities .
C)   rate reduction bonds and senior citizen loan-backed securities.
D)   credit card receivable-backed securities and auto loan-backed securities.E) B) and C)
F) None of the above

Question 16

________ are loans in which the borrower's periodic payment consists of scheduled principal and interest payments over the life of the loan.

Accepted Answer

A)   Nonamortizing assets
B)   Amortizing liabilities
C)   Amortizing assets
D)   Nonamortizing liabilitiesE) A) and C)
F) A) and B)

Question 17

The SPV is the issuer of the ABS.

Accepted Answer

A) True 
 B)False

Question 18

The Small Business Association (SBA) is an agency of the U.S. government empowered to guarantee loans made by approved SBA lenders to qualified borrowers. Describe the nature of these loans.

Accepted Answer

SBA loans are backed by the full faith a...

Question 19

Name three of the four principal reasons as to why a corporation may elect to raise funds via a securitization rather than a corporate bond.

Accepted Answer

The four principal reasons as to why a c...

Exam 25: Market for Asset-Backed Securities

Uncommon forms of internal credit enhancement are senior/subordinate structures, overcollateralization, and reserve funds.

Correct Answer
verified

The cash flow for auto loan-backed securities consists of regularly scheduled monthly loan payments (interest and scheduled principal repayments) and any prepayments.

Correct Answer
verified

By making financial assets tradable in this way, securitization ________.

Correct Answer
verified

Few securitization transactions that employ internal credit enhancements follow a predetermined schedule that prioritizes the manner in which principal and interest generated by the underlying collateral must be used.

Correct Answer
verified

Name three of the four principal reasons as to why a corporation may elect to raise funds via a securitization rather than a corporate bond.

Correct Answer
verified
The four principal reasons as to why a c...
View Answer

When nonamortizing assets are securitized, there is a lockout period or revolving period where all principal received is used to sell old collateral.

Correct Answer
verified

The Small Business Association (SBA) is an agency of the U.S. government empowered to guarantee loans made by approved SBA lenders to qualified borrowers. Describe the nature of these loans.

Correct Answer
verified
SBA loans are backed by the full faith a...
View Answer

Which of the below statements is TRUE?

Correct Answer
verified

________ are loans in which the borrower's periodic payment consists of scheduled principal and interest payments over the life of the loan.

Correct Answer
verified

Because there are several third parties involved in a securitization (e.g., bond insurer, servicer, a trustee, issuer's counsel) and they all play an important role, the rating agency will investigate all of them to determine their ability to perform.

Correct Answer
verified

A credit card receivable is a nonamortizing asset and therefore has a revolving structure. In regards to the lockout period, which of the below statements is FALSE?

Correct Answer
verified

The collateral in a securitization can be classified as either amortizing or nonamortizing assets.

Correct Answer
verified

A security created by pooling loans (other than residential prime mortgage loans) is referred to as ________.

Correct Answer
verified

The SPV is the issuer of the ABS.

Correct Answer
verified

Two of the five of largest sectors within the ABS market that are NOT backed by real estate mortgage loans include: ________.

Correct Answer
verified

The collateral in a securitization can be classified as either amortizing or nonamortizing assets. Describe and contrast amortizing assets with nonamortizing assets.

Correct Answer
verified
Amortizing assets are loans in which the...
View Answer

The competitive transition charge (CTC) is effectively a legislated asset and is the result of the movement to make the electric utility industry more competitive by deregulating the industry. In regards to CTC, which of the below statements is FALSE?

Correct Answer
verified

In the creation of an ABS, which of the below statements is FALSE?

Correct Answer
verified

When unamortizing assets are securitized, the composition of the collateral is fixed over the life of the structure, all principal received by the trust is paid out to the bond classes and the securitization is said to be a self-liquidating structure.

Correct Answer
verified

Exam 25: Market for Asset-Backed Securities

Uncommon forms of internal credit enhancement are senior/subordinate structures, overcollateralization, and reserve funds.

Correct AnswerverifiedShow Answer

The cash flow for auto loan-backed securities consists of regularly scheduled monthly loan payments (interest and scheduled principal repayments) and any prepayments.

Correct AnswerverifiedShow Answer

By making financial assets tradable in this way, securitization ________.

Correct AnswerverifiedShow Answer

Few securitization transactions that employ internal credit enhancements follow a predetermined schedule that prioritizes the manner in which principal and interest generated by the underlying collateral must be used.

Correct AnswerverifiedShow Answer

Name three of the four principal reasons as to why a corporation may elect to raise funds via a securitization rather than a corporate bond.

Correct AnswerverifiedThe four principal reasons as to why a c...View AnswerShow Answer

When nonamortizing assets are securitized, there is a lockout period or revolving period where all principal received is used to sell old collateral.

Correct AnswerverifiedShow Answer

The Small Business Association (SBA) is an agency of the U.S. government empowered to guarantee loans made by approved SBA lenders to qualified borrowers. Describe the nature of these loans.

Correct AnswerverifiedSBA loans are backed by the full faith a...View AnswerShow Answer

Which of the below statements is TRUE?

Correct AnswerverifiedShow Answer

________ are loans in which the borrower's periodic payment consists of scheduled principal and interest payments over the life of the loan.

Correct AnswerverifiedShow Answer

Because there are several third parties involved in a securitization (e.g., bond insurer, servicer, a trustee, issuer's counsel) and they all play an important role, the rating agency will investigate all of them to determine their ability to perform.

Correct AnswerverifiedShow Answer

A credit card receivable is a nonamortizing asset and therefore has a revolving structure. In regards to the lockout period, which of the below statements is FALSE?

Correct AnswerverifiedShow Answer

The collateral in a securitization can be classified as either amortizing or nonamortizing assets.

Correct AnswerverifiedShow Answer

A security created by pooling loans (other than residential prime mortgage loans) is referred to as ________.

Correct AnswerverifiedShow Answer

The SPV is the issuer of the ABS.

Correct AnswerverifiedShow Answer

Two of the five of largest sectors within the ABS market that are NOT backed by real estate mortgage loans include: ________.

Correct AnswerverifiedShow Answer

The collateral in a securitization can be classified as either amortizing or nonamortizing assets. Describe and contrast amortizing assets with nonamortizing assets.

Correct AnswerverifiedAmortizing assets are loans in which the...View AnswerShow Answer

The competitive transition charge (CTC) is effectively a legislated asset and is the result of the movement to make the electric utility industry more competitive by deregulating the industry. In regards to CTC, which of the below statements is FALSE?

Correct AnswerverifiedShow Answer

In the creation of an ABS, which of the below statements is FALSE?

Correct AnswerverifiedShow Answer

When unamortizing assets are securitized, the composition of the collateral is fixed over the life of the structure, all principal received by the trust is paid out to the bond classes and the securitization is said to be a self-liquidating structure.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The four principal reasons as to why a c...
View Answer

Correct Answer
verified

Correct Answer
verified
SBA loans are backed by the full faith a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Amortizing assets are loans in which the...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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