CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

Asset-backed securities allow the borrower ______.

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.
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