CFA Level I · CFA Level I Exam · Fixed-Income Securitization
An investor is analyzing an auto loan asset-backed security whose collateral is a pool of amortizing auto loans. Compared with a credit card receivable ABS, the auto loan ABS most likely has:
An auto loan ABS has an amortizing collateral pool, so principal is repaid throughout the security's life. Credit card ABS instead have non-amortizing receivables, a lockout or revolving period, and new receivables purchased with principal collections.
- Aa lockout period during which only interest is paid
- Ba collateral pool that amortizes, so principal is repaid throughout the lifeCorrect
- Ca revolving structure that replaces repaid receivables with new ones
Explanation
Auto loans are fully amortizing, so principal payments pass through to investors over time. Credit card receivables are non-amortizing and use a revolving (lockout) period in which principal collected buys new receivables. The other two options describe credit card ABS features.
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