Question

1. Fill in the blank: The [ ] has been found in numerous studies to be the single most important determinant of the likelihood of of a mortgage borrowers default.

2. Select the reasons why Institutional Investors may find High Yield Debt Attractive.

		Diversification Theory
		Low Cyclicality
		Capital Gain Potential
		High Interest Coupons
		Lower Refinancing Risk

3. True or False: Contracts such as lease, mortgages and loans that define a payment obligation stream create the contractual cash flows necessary for a securitization.

Answer 1

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Answer:

1)

It is called the loan to value ratio.

The Loan to value ratio (LTV) has been found in numerous studies to be the single most important determinant of the likelihood of default.

2)

The reasons why the institutional investors may find high yield debt attractive :-
High Interest Coupons
Diversification Theory
Low Cyclicality

3)

True

Because securitization refers to pooling of different kind of contractual payment and selling their related cash flow to third party. contracts such as leases, mortgages, loans and agreements that define a payment obligations create the contractual cash flows necessary for securitization.