In Creating the Various Bond Classes (Or Tranches) in a Securitization

question 32

Multiple Choice

In creating the various bond classes (or tranches) in a securitization, there will be rules for distribution of principal and interest. In regards to the transaction structure of an ABS, which of the below statements is FALSE?

• A) The transaction structure of an ABS is designed to create bond classes with investment characteristics that are less attractive to institutional investors.
• B) In creating the various bond classes (or tranches) in a securitization, there will be rules for distribution of principal and interest.
• C) Credit enhancement levels are determined relative to a specific rating desired by the seller/servicer for a security by each rating agency.
• D) Typically in a securitization, there are at least two classes of bondholders: senior bond classes and subordinate bond classes.

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Definitions:

Racial Diversity

The inclusion and representation of individuals from a variety of racial and ethnic backgrounds in a group or organization.

Ethnic Diversity

Ethnic diversity refers to the presence of multiple ethnic groups within a given society, each with its distinct culture, traditions, and sometimes language.

Genocide

The deliberate and systematic extermination of a racial, ethnic, national, or cultural group.

Tutsis

An ethnic group in Rwanda and Burundi, who were historically one of the principal groups involved in the region's social and political dynamics.