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CA Final Securitization — practice questions

Explore 50 free Securitization questions in CA Final Strategicfinancialmanagement. Open each question or exercise to read its content, reference answers and available explanation.

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Securitization questions and exercises with answers

Showing questions 1–30 of 50.

Securitization pools debt obligations and then does what?Read the answer and worked solution →Securities backed by mortgage receivables are called what?Read the answer and worked solution →In a securitization deal, which party initially owns the assets being pooled?Read the answer and worked solution →The pooled assets are transferred to an entity formed only to fund them. What is it called?Read the answer and worked solution →In a true sale, what may the originator do with the transferred assets?Read the answer and worked solution →Who helps the originator set up the structure of a securitization deal?Read the answer and worked solution →Why would a firm choose securitization over a stock offering to raise funds?Read the answer and worked solution →Who rates the securities issued by the SPV to help investors decide?Read the answer and worked solution →A floating rate ABS is typically priced at which rate?Read the answer and worked solution →For fixed rate ABS, when is the coupon set?Read the answer and worked solution →What is the division of securities into classes of differing risk called?Read the answer and worked solution →Which tranche has first claim on cash received by the SPV?Read the answer and worked solution →The cascading payment order among tranches is often called what?Read the answer and worked solution →When loans in the pool default, which tranche absorbs the loss first?Read the answer and worked solution →Which class is the most exposed to payment risk?Read the answer and worked solution →An equity class that gets no coupon usually receives what?Read the answer and worked solution →Why do mortgage or loan pools usually have two separate waterfalls?Read the answer and worked solution →Which is an external form of credit enhancement?Read the answer and worked solution →A reserve or spread account accumulates what?Read the answer and worked solution →Over-collateralisation in securitization means that the pool's value is what?Read the answer and worked solution →Why can the originator often act as the servicer?Read the answer and worked solution →How can the servicer influence investor cash flows?Read the answer and worked solution →What is the duty of the trustee of a securitization trust?Read the answer and worked solution →What does "amortized" mean for most securitizations?Read the answer and worked solution →What is an important concern with fully amortizing ABS?Read the answer and worked solution →A bullet structure returns principal to investors in what manner?Read the answer and worked solution →A hard bullet structure differs from a soft bullet in that it does what?Read the answer and worked solution →In a sequential pay structure, who receives principal first?Read the answer and worked solution →A pro rata bond structure pays principal to tranches in what way?Read the answer and worked solution →A master trust is particularly suited to which kind of assets?Read the answer and worked solution →

Worked practice questions

Securitization pools debt obligations and then does what?

  1. Transfers them to the central bank
  2. Writes off the debts at once
  3. Converts them into equity shares
  4. Sells their cash flows to investors
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Correct answer: D. Sells their cash flows to investors

Pooled receivables are packaged and their cash flows are sold on as tradable securities to investors.

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Securities backed by mortgage receivables are called what?

  1. Commercial paper issues
  2. Treasury strip bonds
  3. Convertible debentures
  4. Mortgage-backed securities
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Correct answer: D. Mortgage-backed securities

Securitized pools of mortgages give rise to mortgage-backed securities, abbreviated MBS.

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In a securitization deal, which party initially owns the assets being pooled?

  1. The servicer
  2. The rating agency
  3. The originator
  4. The trustee
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Correct answer: C. The originator

The originator, usually a company wanting to raise capital, owns the assets before they are transferred to the issuer.

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