In Considering the Structure, the Rating Agencies Will Consider ________

question 34

Multiple Choice

In considering the structure, the rating agencies will consider ________.

• A) how losses will be allocated among the bond classes in the structure.
• B) the prepayment allocation (i.e., the prepayment waterfall).
• C) the interest rate spread between the interest earned on the collateral and the interest paid to the bond classes minus the servicing fee.
• D) the potential for a trigger event to occur that will cause a late amortization of a deal.

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Definitions:

Credit Balance

The amount residing in a financial account that indicates credit or the sum payable to a party, opposite of a debit balance.

Underapplied

Refers to the situation where the allocated manufacturing overhead cost is less than the actual manufacturing overhead cost incurred.

Overapplied

This term typically relates to overhead costs in manufacturing, where the allocated amount exceeds the actual incurred costs.

Deferred Credit

A liability recognized when an entity receives something of value but does not recognize the revenue until a later accounting period.