Which of the Below Statements Is TRUE

question 19

Multiple Choice

Which of the below statements is TRUE?

• A) When rating agencies assign a rating to the tranches in a nonagency CMO, they look at the prepayment risk associated with a tranche.
• B) The process by which the rating agencies determine the amount of credit enhancement needed is referred to as enhancing the transaction.
• C) When prime loans are securitized, the credit enhancement mechanisms and therefore the structures are not complicated; however, when subprime loans are securitized, the structures are more complex because of the need for greater credit enhancement.
• D) In a senior-subordinate structure, two general categories of tranches are created: an older tranche and younger tranches.

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Definitions:

Deductible

The amount you pay for health care services before your health insurance begins to pay.

Assignment

The allotment or designation of a task, duty, or responsibility to someone.

Co-payment

A co-payment is a fixed amount paid by a patient for receiving a particular medical service, with the remaining balance covered by insurance.

Professional Services

Services provided by individuals or companies that require a high level of training or education, typically in specialized fields.