Which one of these terms applies to the bundling of a group of loans with the subsequent sale of the cash flows from those loans?
A) Convertible bond
B) Warrants
C) Asset-backed bond
D) Preferred bond

Question

Quizplus · Accepted Answer

Asset-backed bonds involve the bundling of a group of loans or assets (such as mortgages or credit card receivables) and selling the cash flows from those loans or assets to investors in the form of bonds. This allows the issuer to provide a predictable stream of income to investors while transferring the credit risk of the loans/assets to the bondholders. Convertible bonds, warrants, and preferred bonds involve different types of financial instruments that are not related to the bundling and selling of loans.

Which One of These Terms Applies to the Bundling of a Group