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61. Analyst 1: Credit tranching allows investors to choose between extension risk and contraction risk. Analyst 2: Time tranching allows investors to choose between extension risk and contraction risk. Which analyst’s statement is most likely correct?
Analyst 1.
Analyst 2.
Neither of them.
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62. Credit tranching refers to creating a multi-layered capital structure that has:
fully amortizing and partially amortizing tranches.
recourse and non-recourse tranches.
senior and subordinate tranches.
63. Credit tranching refers to creating a multi-layered capital structure that has:
64. Time tranching helps investors to choose between:
extension risk and credit risk.
contraction risk and credit risk.
extension risk and contraction risk.
65. Frank Smith obtains a recourse mortgage loan for $300,000. One year later, when the outstanding balance of the mortgage is $290,000, Frank cannot make his mortgage payments and defaults on the loan. The lender forecloses the loan and sells the house for $250,000. What amount is the lender entitled to claim from Frank?
$0.
$40,000.
$50,000.
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