Reading 63: Overview of Bond Sectors and Instruments-LOS j 习 border

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Session 15: Fixed Income: Basic Concepts
Reading 63: Overview of Bond Sectors and Instruments

LOS j: Describe collateralized debt obligations.

 

 

A CDO issued to profit on the spread between the return on the underlying assets and the return paid to investors is referred to as a(n):

A) spread CDO.

B) balance sheet CDO.

C) arbitrage CDO.

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A CDO (collaterized debt obligation) issued to profit on the spread between the return on the underlying assets and the return paid to investors is referred to as an arbitrage CDO. A balance sheet CDO is created by a bank or insurance company wishing to reduce their loan exposure on the balance sheet. Spread CDO is a fabricated term.

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A debt security that is collateralized by emerging market debt would be a(n):

A) CMO.

B) CDO.

C) MTN.

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A CDO (collaterized debt obligation) is a debt obligation that is backed by an underlying diversified pool of business loans, mortgages, emerging market debt, corporate bonds, asset-backed securities, or non-performing loans. A MTN is a medium-term note issued by a corporation. A CMO (collaterized mortgage obligation) is a debt obligation that is backed by mortgages.

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A debt security that is collateralized by various corporate bonds would be a(n):

A) CDO.

B) TIP.

C) CMO.

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A CDO (collaterized debt obligation) is a debt obligation that is backed by an underlying diversified pool of business loans, mortgages, emerging market debt, corporate bonds, asset-backed securities, or non-performing loans. A TIP is a Treasury Inflation-Protected Security. A CMO (collaterized mortgage obligation) is a debt obligation that is backed by mortgages.

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