Which one of the following provides the best example of securitization?
A) convertible bond
B) call option
C) mortgage pass-through security
D) preferred stock

Question

Quizplus · Accepted Answer

Securitization involves pooling together similar financial assets and converting them into marketable securities. Mortgage pass-through securities are a type of securitization that involves pooling together a group of mortgages and selling the cash flows from the mortgages to investors in the form of bonds or securities. Therefore, C is the best example of securitization. The other options, convertible bonds, call options, and preferred stock, do not involve the pooling of financial assets into securities.

Which One of the Following Provides the Best Example of Securitization