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:

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance.