Derivative Instruments and Hedging Activities Paper 7
1
Which of the following is TRUE with respect to credit-linked notes?
Detailed Answer
C
2
Which of the following statements accurately describes the relationship between
collateralized bond obligations (CBOs), collateralized debt obligations (CDOs), and
collateralized loan obligations (CLOs)?
Detailed Answer
A
3
Which of the following statements LEAST accurately describes collateralized debt
obligations (CDOs), collateralized bond obligations (CBOs), and collateralized loan
obligations (CLOs)?
Detailed Answer
D
4
Which of the following statements LEAST accurately describes overcollateralization
in the context of collateralized debt obligations (CDOs)?
Detailed Answer
C
5
Which of the following is NOT one of the three periods of the life cycle of a
collateralized debt obligations (CDOs)?
Detailed Answer
A
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?
Detailed Answer
C
7
Which of the following statements most accurately characterizes a collateralized fund
obligation (CFO)?
Detailed Answer
C
8
Which of the following statements LEAST accurately characterizes a collateralized
commodity obligation (CCO)?
Detailed Answer
B
9
Which of the following statements LEAST accurately characterizes a single-tranche
CDO (collateralized debt obligation)?