Which of the Following Is True of Collateralized Debt Obligations

question 96

Multiple Choice

Which of the following is true of collateralized debt obligations (CDOs) ?

• A)They are pools of assets that have zero default risk.
• B)They give investors rights to shares of streams of money from pools of mortgages.
• C)They offer very low returns and they are safe.
• D)Their values are easily established.

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Definitions:

Implicit Cost

The opportunity cost equal to what a firm must give up in order to use resources it already owns for production, without direct payment.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs.

Economic Profit

The difference between total revenue and total cost, including both explicit and implicit costs.