New Enroll for RBI, SEBI & NABARD Intro Class! April 18 at 9:15 PM

    Question

    Match the following:

    cellspacing="0" cellpadding="0"> Term Feature A. CDO 1) Pooled cash-flows sold to investors in discreet tranches B. FPO 2) Trade without “exchange” C. Debenture 3) unsecured debt instrument D. OTC Market 4) Share issuance by a listed company
    A 4 1 3 2 Correct Answer Incorrect Answer
    B 1 4 3 2 Correct Answer Incorrect Answer
    C 2 1 4 3 Correct Answer Incorrect Answer
    D 2 4 3 1 Correct Answer Incorrect Answer
    E 1 2 3 4 Correct Answer Incorrect Answer

    Solution

    Collateralized Debt Obligation (CDO) is a structured financial product that pools together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors. A collateralized debt obligation (CDO) is so-called because the pooled assets – such as mortgages. A follow-on public offer (FPO) is an issuing of shares to investors by a public company that is already listed on an exchange. An FPO is essentially a stock issue of supplementary shares made by a company that is already publicly listed and has gone through the IPO process. A debenture is a type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer An over-the-counter (OTC) market and an exchange market are the two basic ways of organizing financial markets. In an OTC market, dealers act as market makers by quoting prices at which they will buy and sell a security or currency. A trade can be executed between two participants in an OTC market without others being aware of the price at which the transaction was effected. In general, OTC markets are therefore less transparent than exchanges and are also subject to fewer regulations.

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