The Main Purpose of the Term Asset-Backed Securities Loan Facility

question 38

Multiple Choice

The main purpose of the Term Asset-Backed Securities Loan Facility (TALF) is to:

• A)Buy mortgage backed securities owned by Freddie Mac,Fannie Mae,and Ginnie Mae
• B)Issue CDOs and use the proceeds to fund infrastructure projects to stimulate the economy
• C)Regulate hedge funds to reduce investments in risky assets
• D)Use residential loans as collateral to purchase U.S.Treasuries as a way to reduce interest rates

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Definitions:

Face Value

The original cost of a bond or the principal balance to be paid back at maturity, excluding interest.

Market Interest Rate

The prevailing rate at which interest is charged on loans and bonds in the broader financial market.

Bond Yield

The return an investor realizes on a bond, calculated by the coupon payments relative to the market price of the bond.

Face Value

The nominal or dollar value stated on a financial instrument, such as a bond or stock, representing its worth at issuance or maturity.