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CA Final Securitization — practice questions — page 2

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 31–50 of 50.

In a master trust, collections are used to buy new receivables during which period?Read the answer and worked solution →Why does a master trust use revolving and accumulation periods?Read the answer and worked solution →Grantor trusts pass principal and interest to holders on what basis?Read the answer and worked solution →How does securitization help a bank facing asset-liability mismatch?Read the answer and worked solution →Why may securitizing only AAA-quality assets harm the originator?Read the answer and worked solution →Why is securitization often not cost-efficient for small transactions?Read the answer and worked solution →Which describes early amortization risk in revolving ABS?Read the answer and worked solution →Which is a typical payout event triggering early amortization?Read the answer and worked solution →Which ABS price moves less when interest rates change?Read the answer and worked solution →Servicer risk in securitization is mitigated by which arrangement?Read the answer and worked solution →What flaw did the 2007-2008 crisis expose about loan originators?Read the answer and worked solution →The term "tranche" in French literally means what?Read the answer and worked solution →Which MBS is backed by mortgages on single-family, one- to four-unit real estate?Read the answer and worked solution →A principal-only (PO) stripped MBS has cash flows backed by what?Read the answer and worked solution →An MBS factor measures what?Read the answer and worked solution →A mortgage pool has Rs 300 lakh at 6% and Rs 100 lakh at 8%. What is the weighted-average coupon?Read the answer and worked solution →A pool has Rs 200 lakh maturing in 120 months and Rs 600 lakh maturing in 240 months. What is its WAM?Read the answer and worked solution →Which extra risk does an MBS carry compared with a vanilla corporate bond?Read the answer and worked solution →Which US agency guarantees timely MBS payments with the full faith and credit of the US government?Read the answer and worked solution →Why is credit card debt called a nonamortizing loan?Read the answer and worked solution →

Worked practice questions

In a master trust, collections are used to buy new receivables during which period?

  1. Amortization period
  2. Accumulation period
  3. Revolving period
  4. Maturity period
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Correct answer: C. Revolving period

During the revolving period, principal payments on card balances are used to purchase additional receivables.

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Why does a master trust use revolving and accumulation periods?

  1. Cards have fixed ten-year terms
  2. Cards are never repaid at all
  3. Investors dislike all coupons
  4. Receivables pay off before maturity
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Correct answer: D. Receivables pay off before maturity

Securities can run up to 10 years while card receivables pay off much faster, so these periods align timing.

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Grantor trusts pass principal and interest to holders on what basis?

  1. Sequential
  2. Pro-rata
  3. Residual only
  4. Senior first
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Correct answer: B. Pro-rata

A grantor trust passes principal and interest, after expenses, to security holders pro rata.

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