A Collateralized Debt Obligation (CDO)

question 15

Multiple Choice

A collateralized debt obligation (CDO) :

• A)Is an insurance policy that any investor can purchase
• B)Is a bond that is secured by a portfolio of mortgages
• C)Protects an investor in the event that the issuer of the mortgage defaults on the contract
• D)Acts as a hedge against changes in interest rates
• E)Were outlawed with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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Definitions:

Landslide

A mass movement of rock, earth, or debris down a slope due to gravity.

Pressure

The force exerted by something against a surface, usually measured in units such as Pascal (Pa) or pounds per square inch (psi).

Basaltic Lava

A type of lava originating from the mantle, characteristically dark and rich in magnesium and iron, with low viscosity.

Shield Volcano

A shield volcano is a type of volcano with broad, gently sloping sides and nearly circular base, formed by the eruption of low-viscosity lava that can flow a great distance from the vent.