ch9,10 - ch9,10 Student 1 When a bank sets aside a group of...

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ch9,10 Student: ___________________________________________________________________________ 1. When a bank sets aside a group of income-earning assets and then sells securities based upon those assets it is ________________________ those assets. ________________________________________ 2. Often when loans are securitized they are passed on to a _________________________ who pools the loans and sells securities. ________________________________________ 3. A(n) _________________________ allows a homeowner to borrow against the residual value of their residence. ________________________________________ 4. _________________________ allow the bank to generate fee income after they have sold a loan. The bank continues to collect interest and principal from the borrowers and passes these collections to the loan buyers. ________________________________________ 5. In a _________________________ an outsider purchases part of a loan from the selling financial institution. Generally the purchaser has no influence over the terms of the loan contract. ________________________________________ 6. A(n) _________________________ is a contingent claim of the bank that issues it. The issuing bank, in return for a fee, guarantees the repayment of a loan received by its customer or the fulfillment of a contract made by its customer to a third party. ________________________________________ 7. A(n) _________________________ occurs when two banks agree to exchange a portion or all of the loan repayments of their customers. ________________________________________ 8. A(n) __________________ guards against the losses in the value of a credit asset. It would pay off if the asset declines significantly in value or if it completely turns bad. ________________________________________ 9. A(n) _________________________ combines a normal debt instrument with a credit option. It allows the issuer of the debt instrument to lower its loan repayments if some significant factor changes. ________________________________________ 10. The _________________________ of a standby letter of credit is a bank or other investor who is concerned about the safety of funds committed to the recipient of the standby letter of credit. ________________________________________ 1
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11. A(n) _________________________ guarantees the swap parties a specific rate of return on their credit asset. Bank A may agree to pay the total return on the loan to Bank B plus any appreciation in the market value of the loan. In return Bank A will often get LIBOR plus a fixed spread plus any depreciation in the value of the loan. ________________________________________ 12. The ________________________ is the party that is requesting a standby letter of credit. ________________________________________ 13. The __________________ is the bank or financial institution which guarantees the payment of the loan
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This note was uploaded on 11/17/2008 for the course FINA 4443 taught by Professor Mattews during the Fall '08 term at Texas A&M.

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ch9,10 - ch9,10 Student 1 When a bank sets aside a group of...

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