6．Taylor explains to Johnson that there are major differences between asset-backed securities (ABS) and corporate bonds in terms of credit risk. Which of the following is a major difference? ABS have: A) a greater predictability of cash flows due to the absence of operational risk. B) complete predictability of cash flows and no operational risk. C) the same predictability of cash flows but a lower operational risk. D) a smaller predictability of cash flows due to the higher operational risk. The correct answer was A) In an ABS transaction the role of the servicer is to simply collect the cash flows. There is no active management with respect to the collateral and so very little operational risk associated with cash flows. Conversely, corporate management includes tremendous operational risk. 7．Taylor tries to explain the subtleties of foreign sovereign debt to Johnson. Which of the following is NOT a factor used in assessing the credit quality of a national government's local currency debt? A) Balance of payments and external balance sheet structure. B) Income and economic structure. C) Fiscal policy and budgetary flexibility. D) Monetary policy and inflation pressures. The correct answer was A) In assessing the credit quality of local currency debt, only domestic government policies that emphasize fostering or impeding timely debt service are considered. Only for foreign currency debt will credit analysis focus on the interaction of domestic and foreign government policies as measured by a country's balance of payments and the structure of its external balance sheet. 8．An unanticipated deterioration in the credit quality of an issuer that results in a decline in the price of the issue is referred to as: A) credit risk. B) price risk. C) default risk. D) downgrade risk. The correct answer was D) Simply stated, downgrade risk is the risk that the issue will be downgraded. Credit spread risk may also be relevant to this question. Credit spread risk is the risk that the credit spread will increase and cause the value of the issue to decrease. 9．The risk that an issuer’s debt obligation will fall in value because the required risk premium for the debt obligation has increased is referred to as: A) credit spread risk. B) credit risk. C) default risk. D) downgrade risk. The correct answer was A) If the required risk premium increases, all else being equal, the value of the debt will decrease. This is known as credit spread risk. 10．The risk that the borrower will fail to repay the credit obligation is referred to as: A) credit spread risk. B) default risk. C) downgrade risk. D) credit risk. The correct answer was B) Default risk is the risk that the creditor will fail to make timely payments of principal and interest. 11．Credit ratings measure which type of risk associated with credit obligations? A) Default risk. B) Credit risk. C) Credit spread risk. D) Downgrade risk. The correct answer was A) Credit ratings focus on the risk of default based on a number of quantitative measures. | 
发表于 2008-4-14 13:24
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