Which of the Following Best Describes the Benefits to the Borrower

question 21

Multiple Choice

Which of the following best describes the benefits to the borrower of selling asset-backed securities?

• A) Due to the portfolio effect, the borrower can package up low-quality accounts receivable and sell them for a premium price.
• B) The borrower trades future cash flows for current cash flows.
• C) The asset-backed security is likely to carry a high credit rating of AA or better.
• D) The borrower trades future cash flows for current cash flows and the asset-backed security is likely to carry a high credit rating of AA or better.

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Definitions:

Contract Price

The total amount agreed upon in a contract for the sale of goods or services.

Call for Tenders

A formal request issued by a business or government for suppliers to submit proposals to undertake a specified project or service.

Municipality

A city, town, or other district possessing corporate status and usually its own local government.

Compensation

Payment or reward given for services or to make up for someone's loss, damage, or injury.