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Suppose a market for securitized auto loans expands. We expect that A. the market becomes more...

Suppose a market for securitized auto loans expands. We expect that

A. the market becomes more liquid. B. interest rates on auto loans increase. C. fewer auto loans will be made. D. lenders increase lending standards

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Answer #1
  • Option A is the answer.
  • Suppose a market for securitised auto loans expands, we expect that the market becomes more liquid.
  • The process of securitization increases liquidity by promoting small investors to purchase shares from larger markets. Automotive markets are getting higher liquidity by enabling the purchasers to avail securitised auto loans and thereby increasing the number of purchases.
  • Securitisation helps in changing an illiquid asset to a security. Pooling of various types of contractual debts are also a part of securitisation.
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