- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 45. Introduction to Asset-Backed Securities
- Subject 8. Collateralized Debt Obligations
CFA Practice Question
Select the correct statement(s) regarding a CDO.
II. The majority of the underlying collateral typically pays a fixed rate.
III. The equity tranche receives a floating-rate payment.
IV. The junior tranche receives a floating-rate payment.
I. To offer sufficient protection, over 50% of the deal is structured as either equity or junior tranches; the senior tranche is less than 50%.
II. The majority of the underlying collateral typically pays a fixed rate.
III. The equity tranche receives a floating-rate payment.
IV. The junior tranche receives a floating-rate payment.
Correct Answer: II
I. Over 50% of the deal is structured as a senior tranche.
III. The equity tranche receives any remaining interest that is received from the collateral but not paid to the debt tranches.
IV. The junior tranche receives a fixed-rate payment.
User Contributed Comments 1
User | Comment |
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quanttrader | only senior tranche recvs floating |