Suppose That ABSs Are Created from Portfolios of Subprime Mortgages

question 14

Multiple Choice

Suppose that ABSs are created from portfolios of subprime mortgages with the following allocation of the principal to tranches: senior 85%,mezzanine 10%,and equity 5%.(The portfolios of subprime mortgages have the same default rates.) An ABS CDO is then created from the mezzanine tranches with the same allocation of principal.How high can losses on the mortgages be before the mezzanine tranche of the ABD CDO bears losses?

• A) 5.0%
• B) 5.5%
• C) 6.0%
• D) 6.5%

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Positioning

The process of establishing a brand or product in the market by differentiating it from competitors, targeting specific consumer segments.

Benefits

Advantages or favorable outcomes provided, often in the context of employment, such as healthcare or retirement savings.

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Preferences and inclinations of consumers regarding products, services, and experiences, shaped by cultural, social, personal, and psychological factors.

Position

Describes the unique place a brand or product occupies in the customers' minds relative to competing offerings.