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Basic Question 5 of 5
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
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. |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
explain benefits of securitization for issuers, investors, economies, and financial markets
CFA® 2024 Level I Curriculum, Volume 4, Module 17.