Derivative Instruments and Hedging Activities Paper 7

1

Which of the following is TRUE with respect to credit-linked notes?






2

Which of the following statements accurately describes the relationship between collateralized bond obligations (CBOs), collateralized debt obligations (CDOs), and collateralized loan obligations (CLOs)?





3

Which of the following statements LEAST accurately describes collateralized debt obligations (CDOs), collateralized bond obligations (CBOs), and collateralized loan obligations (CLOs)?






4

Which of the following statements LEAST accurately describes overcollateralization in the context of collateralized debt obligations (CDOs)?





5

Which of the following is NOT one of the three periods of the life cycle of a collateralized debt obligations (CDOs)?






6

A CDO trust holds $500 million in bonds with an 9% coupon. The CDO has three tranches: A $400 million A tranche with a coupon of 9%, a $50 million B tranche with a coupon of 10% and a $50 million equity tranche with a coupon of 12%. Ignoring bond defaults, changes in market values or any fees, which of the following values is closest to the annual cash flow that the equity tranche holders can expect to receive?






7

Which of the following statements most accurately characterizes a collateralized fund obligation (CFO)?





8

Which of the following statements LEAST accurately characterizes a collateralized commodity obligation (CCO)?





9

Which of the following statements LEAST accurately characterizes a single-tranche CDO (collateralized debt obligation)?






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