The Creation of a New Security by Combining Otherwise Separate

question 77

Multiple Choice

The creation of a new security by combining otherwise separate loan agreements is called

• A) bundling.
• B) securitization.
• C) a Treasury security.
• D) secondary markets.
• E) secondarization.

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Definitions:

Coase Theorem

A principle that if property rights are clearly defined and transaction costs are low, private bargains will ensure that the market always reaches an efficient outcome regardless of who holds the initial property rights.

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be positive or negative.

Cap-And-Trade

An environmental policy mechanism that sets a cap on emissions and allows businesses to buy and sell permits for the right to emit.

Carbon Tax

A tax imposed on the carbon content of fuels to mitigate environmental impacts of carbon dioxide emissions.