Which of the Below Statements Is TRUE

Multiple Choice

Which of the below statements is TRUE?

A) When rating agencies assign a rating to the tranches in a nonagency CMO, they look at the prepayment risk associated with a tranche.
B) The process by which the rating agencies determine the amount of credit enhancement needed is referred to as enhancing the transaction.
C) When prime loans are securitized, the credit enhancement mechanisms and therefore the structures are not complicated; however, when subprime loans are securitized, the structures are more complex because of the need for greater credit enhancement.
D) In a senior-subordinate structure, two general categories of tranches are created: an older tranche and younger tranches.