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    Question

    Which credit product was used to bundle loans with low

    credit rating and transform them into credit offerings with high credit ratings during the Global Financial Crisis of 2008-09?
    A Credit Default Swaps Correct Answer Incorrect Answer
    B Collateralized Debt Obligations Correct Answer Incorrect Answer
    C Mortgage-Backed Securities Correct Answer Incorrect Answer
    D Adjustable-Rate Mortgages Correct Answer Incorrect Answer

    Solution

    Collateralized Debt Obligations were used to assign higher ratings to securities by creating credit tranches. This can occur even if the underlying securities are not highly rated.

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