the economics of money, banking, and financial markets

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39. 
    

    ____ is a process of bundling together smaller loans (like mortgages) into standard debt
    securities.
    A) Securitization
    B) Origination
    C) Debt deflation
    D) Distribution
    Answer: A
    Diff: 1 Type: MC Page Ref: 188 - 189
    Skill: Recall
    Objective List: 9.3 Discuss the most recent financial crisis

    
    


40. 
    

    ____ is the development of new, sophisticated financial instruments.
    A) Discounting
    B) Origination
    C) Financial engineering
    D) Distribution
    Answer: C
    Diff: 1 Type: MC Page Ref: 188
    Skill: Recall
    Objective List: 9.3 Discuss the most recent financial crisis

    
    


41. 
    

    A ____ pays out cash flows from subprime mortgage-backed securities in different
    tranches, with the highest-rated tranch paying out first, while lower ones paid out less if there
    were losses on the mortgage-backed securities.
    A) Collateralized debt obligation (CDO)
    B) Adjustable-rate mortgage
    C) Negotiable CD
    D) Discount bond
    Answer: A
    Diff: 3 Type: MC Page Ref: 188
    Skill: Recall
    Objective List: 9.3 Discuss the most recent financial crisis

    
    


42. 
    

    A bank loan to a household or business was not a security because ____.
    A) it could not be bought or sold in a financial market
    B) it was not a debt instrument
    C) there was no market for them
    D) they increased the asymmetric information problem
    Answer: A
    Diff: 2 Type: MC Page Ref: 188
    Skill: Recall
    Objective List: 9.3 Discuss the most recent financial crisis