Collateralized debt obligations are:
A)essentially the same thing as Eurobonds.
B)bonds issued by MNCs payable in the domestic currency of the MNC.
C)equity instruments issued by MNCs that are convertible into Eurobonds.
D)backed by risky assets and are sold in classes having different levels of risk.

Question

Quizplus · Accepted Answer

Collateralized debt obligations (CDOs) are financial instruments that are backed by a pool of loans, bonds or other underlying assets. These underlying assets are typically divided into different tranches with different levels of risk and return, allowing investors to choose the level of risk and return that best suits their needs. Therefore, option D is the correct choice as it accurately describes CDOs as instruments that are sold in classes having different levels of risk. Options A, B and C are incorrect as they describe other financial instruments that are not related to CDOs.

Collateralized Debt Obligations Are