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:

Management

The act or skill of organizing, planning, leading, and controlling resources to achieve specific goals.

Major Decision

A significant ruling or conclusion, often by a court or high-level authority, that sets a precedent or has wide-ranging implications.

Limited Partner

A partner in a limited partnership whose liability is limited to the amount of her investment.

Statutory Provisions

Specific clauses or sections within a statute (law) enacted by a legislative body, governing various legal matters or actions.