In Regards to Auto Loan-Backed Securities, Which of the Below

question 40

Multiple Choice

In regards to auto loan-backed securities, which of the below statements is TRUE?

• A) Auto loan-backed securities are issued by the financial subsidiaries of auto manufacturers (domestic and foreign) but not by commercial banks and independent finance companies.
• B) The cash flow for auto loan-backed securities consists of regularly scheduled monthly loan payments (interest and scheduled principal repayments) and any prepayments.
• C) For securities backed by auto loans, prepayments cannot result from sales and trade-ins requiring full payoff of the loan.
• D) Although refinancings may be a minor reason for prepayments of residential mortgage loans, they are of major importance for automobile loans.

---

Definitions:

Average Total Cost

The total cost of production divided by the quantity of output produced; it includes all fixed and variable costs.

Average Total Cost

The total cost of production divided by the quantity produced, indicating the average cost per unit of output.

Marginal Cost

The added expense incurred from producing an additional unit of a good or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total amount of output produced, indicating the cost per unit of output.