The Bundling of Mortgages Together and the Issuing of Securities

question 46

Multiple Choice

The bundling of mortgages together and the issuing of securities for their financing made it possible for investment banks to

• A) reduce their exposure to risk in the event that the overall mortgage default rate rose.
• B) reduce the amount of capital required to back these bundled securities.
• C) build up large reserves so they would be able to meet their obligations even if the mortgage default rate rose substantially.
• D) quickly access funds to meet short-term debt obligations.

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Definitions:

Thymus Gland

A primary lymphoid organ located in the upper anterior part of the chest cavity, involved in the maturation of T lymphocytes (T cells).

Insulin

A hormone produced by the pancreas that regulates blood sugar levels by facilitating the uptake of glucose into tissues.

Glucagon

A hormone produced by the pancreas that raises blood glucose levels by promoting the breakdown of glycogen to glucose in the liver.

Adrenal Medulla

The inner part of the adrenal gland that produces adrenaline and noradrenaline, hormones involved in the body's fight-or-flight response.