- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 17. Fixed-Income Securitization
- Subject 1. The Benefits of Securitization
CFA Practice Question
Asset-backed securities allow the borrower ______.
II. lower the cost of debt
III. to achieve a desirable credit rating
I. to separate the assets used as collateral from the corporation that is seeking the funding
II. lower the cost of debt
III. to achieve a desirable credit rating
Correct Answer: I, II and III
User Contributed Comments 5
| User | Comment |
|---|---|
| Nightsurfer | Is I really a function of ABSs or is it that they can be securitized that provides this? |
| cfacfa | Nightsurfer: chicken or egg .. does it matter? these securities do allow borrowers to separate ... |
| Rotigga | To clarify point III, the borrower itself DOES NOT achieve a desirable rating, but the ABS it issues can receive a desirable credit rating. |
| CJPerugini | You are lowering your exposure to risk which will increase your credit rating. |
| khalifa92 | I. assets are separated from the balance sheet into a separate entity. II. lower cost of debt due to the direct claims made by investors. III. enhanced risk-adjusted returns > higher rating. |