A structured financial product that pools together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors
CDO- collateralized debt obligation
100
Safest rating possible
AAA
100
When selling a CDO the seller is in the best interest of whom?
Their company and/or their own personal gain
100
Rating systems were apart of the economic crisis of 2008
True
100
Mortgage is a...
type of loan
200
A predetermined set of payments used on the housing market.
Mortgage
200
most commonly used rating from 2000-2008
AAA
200
When investment banks buy loans from the banks what is their next step?
Repackage the cash flows and sell as CDOs to investors
200
Rating companies were protected in court because they were being paid to give an opinion
True
200
A house is an example of...
collateral
300
Highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
AAA rating
300
Worst rating possible
D
300
What are loans backed by?
Collateral
300
B is a better rating then BB
False
300
Moody's is a...and there job is to...
rating agency...rate investments based on the stability of the contents
400
portion or slice of debt
Tranche
400
The reason so many sub prime CDO's were rated AAA from 2000-2008
financial influence from large banks and companies
400
What is a "bet" against a CDOs success called?
Credit Default Swap
400
A tranche is amounts of debt set together
False, a tranche is a portion or slice of debt
400
Merrill Lynch is an...and there job is to...
investment bank...provide legal, tax or financial advice
500
a financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option
securities
500
Companies that rated CDOs (Name one)
S&P, Moody's or Fitch ratings
500
How much money did the government use to bail out the banks in 2008? (Hint: > $100 B)
$250,000,000,000.00
500
It was mainly the banks fault for the US economic crisis of 2008
True, it was the lenders who ultimately lent funds to people with poor credit and a high risk of default. (Investopedia)
500
A loan for $50,000 to a minimum wage worker is a...