Loan-backed securities,which closely resemble traditional bonds,carry various forms of credit enhancements,which may include all of the following,except:

Question

Quizplus · Accepted Answer

Loan-backed securities may have credit enhancements such as credit letter guaranteeing repayment, set aside of a cash reserve, and division into different risk classes. However, early payment clauses are not a form of credit enhancement for these securities. Therefore, option D is the correct answer as it is the exception.

Loan-Backed Securities,which Closely Resemble Traditional Bonds,carry Various Forms of Credit