Other Securities Products
Which of the following investments is most likely to have extension risk?
A CMO
Which of the following statements best describes a hedge fund?
A private and unregistered investment pool that accepts the investor's money and employs sophisticated hedging and arbitrage techniques using long and short positions, leverage and derivatives, and investments in many markets
Which of the following accounts would a CMO Z-tranche be best suited for?
A professionally managed hedge fund specializing in real estate portfolio securities
Which of the following accounts would a collateralized mortgage obligation (CMO) Z-tranche be best suited for?
A professionally managed hedge fund specializing in real estate portfolio securities
Which of the following statements regarding hedge funds is correct?
Hedge funds are usually structured as a partnership
A client interested in the returns offered by CMOs asks you which type has the lowest prepayment risk. What should you say?
PACS
Which of the following mortgage-backed securities would provide investors with the most predictable maturity date?
PACS
A characteristic of hedge funds that would not be found in a mutual fund is
a lock-up period.
Investors in collateralized mortgage obligations (CMOs) tend to choose a tranche meeting their maturity expectations. Should the debt continue past the expected payoff date, it is an example of
extension risk
Which of the following is not included in the definition of an investment company under the Investment Company Act of 1940?
hedge fund
All of the following statements regarding the tax treatment interest received from a collateralized mortgage obligation (CMO) investment is true except
it is nontaxable at the local level
Which of the following regarding taxation of collateralized mortgage obligation (CMO) interest is true?
it is subject to federal, state, and local taxes
Compared to U.S. government agency-backed CMOs, CDOs have
less prepayment risk
Which of the following risks would least impact collateralized mortgage obligation (CMO) investors?
liquidity risk
A structured instrument known as an asset-backed security would not be backed by
loans on marginable securities
All of the following are risks of investing in publicly traded mortgage-backed securities except
the market for mortgage-backed securities is illiquid
All of the following are risks of investing in publicly traded mortgage-backed securities except
the market for mortgage-backed securities is illiquid.
There are many different types of asset-backed securities, but the common theme uniting all of them is
they are supported by a contractual obligation to pay.
