Question

Securitization of a financial instrument refers to

Group of answer choices

ensuring the instrument is fully backed by assets.

packaging similar CD's, loans or mortgages, into a negotiable security.

the result of successful regulation by the SEC.

the method by which repurchase agreements are carried out.

Answer 1

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Answer:

Banks, insurance companies and other financial institutions sell the securitized investments as a package of loans of certain type including mortgages, auto, credits etc . These instutions then sell the packages to the investors. This package of loans generates principal and interest for those who purchased the assets

Other options are incorrect as all the instruments are not necessarily backed with assets. Also, they are not a successful regulation by the SEC.

Hence option B