Which of the Following Best Describes the Benefits to the Borrower

question 124

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) b and c are correct.

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Definitions:

Fiscal Year

A 12-month period used for accounting purposes and reporting financial results, which may or may not align with the calendar year.

Interest Calculations

The process of determining the amount of interest due on a loan or investment based on the rate, principal amount, and time period.

Journalize

The process of recording financial transactions in a company's journal, detailing the accounts affected and the amounts.

Merchandise

Goods that are bought and sold in the course of business operations, often referred to as inventory in a retail context.