The Availability of a Liquid Secondary Market for Asset-Backed Securities

question 65

True/False

The availability of a liquid secondary market for asset-backed securities provided an incentive for FIs to follow an originate-to-distribute strategy of loan origination.

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Definitions:

Retained Earnings

The portion of net earnings not distributed as dividends but retained by the company to reinvest in its core business or to pay debt.

Stock Dividends

Dividends paid to shareholders in the form of additional shares of stock instead of cash.

Contributed Capital

The total value of the cash and other assets received by a company from its shareholders in exchange for stock, also known as paid-in capital.

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, often paying fixed dividends.