Case 4 - Securitization

Case 4 - Securitization - Sean Keeton 615007033 1) What are...

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Sean Keeton 615007033 1) What are balance-sheet lenders? Specifically explain the use of the term balance-sheet in this name. The balance sheet lenders are those that make loans and hold on to them. Balance sheet is used in the term to show where they come up with the amount of the loan. It depends on the numbers on the balance sheet. 2) What is the purpose of a mortgage-backed security? What role does such a security play in maintaining liquidity in credit markets? The purpose of mortgage –backed securities are to pay out the cash flows to investors from a pool of mortgages. The securitized loans highly liquidate the market because they get cashflows and not just principle and interest. 3) Why did the market for mortgage-backed securities dry up? How is the effect of that market's crunch showing in debt availability to those with good credit risk? It dried up because investment banks had scaled back their lending. This caused companies such as insurance cut back their loans by 25 percent. 4) Define the concept of "valuation" in accounting, the historical cost basis, and fair-value accounting. Provide examples in which each of these bases of reporting is used in financial statements. Valuation is what to value your assets at. Historical cost is a way to value assets which is the price
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This note was uploaded on 05/03/2008 for the course ACCT 327 taught by Professor Knight during the Spring '08 term at Texas A&M.

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Case 4 - Securitization - Sean Keeton 615007033 1) What are...

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