Tranching Makes It So That Packages of Reliable, Low-Risk Mortgages

question 10

Multiple Choice

Tranching makes it so that packages of reliable, low-risk mortgages could be sold to ______________, while higher-risk subprime mortgages could be sold to ___________.

• A) more risk-averse investors; risk-loving investors
• B) more risk-loving investors; risk-averse investors
• C) national banks; local banks
• D) local banks; the government

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Definitions:

Contract Law

A branch of law that deals with agreements between parties, their rights, and obligations.

Consideration

In contract law, consideration refers to something of value exchanged between parties that is necessary for a valid contract.

Binding Contract

A legal agreement between two or more parties that is enforceable by law.

Interpret

To explain or provide the meaning of something, often used in the context of understanding legal documents, languages, or artistic works.