The Creation of a New Security by Combining Otherwise Separate

question 77

Multiple Choice

The creation of a new security by combining otherwise separate loan agreements is called

• A) bundling.
• B) securitization.
• C) a Treasury security.
• D) secondary markets.
• E) secondarization.

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Definitions:

Debt-Equity Ratio

A calculation that indicates the financial leverage of a firm, determined by dividing its overall liabilities by the equity of the shareholders.

Pre-Tax Cost

Pre-Tax Cost refers to the cost of an expense or investment before the deduction of taxes.

Required Return

The minimum expected return by investors for providing capital to a company or project, considering the risk involved.

EBIT

A profitability metric for a company that omits expenses related to interest and income taxes, known as Earnings Before Interest and Taxes.