Tranché

    graph LR;
	    A[Pool of Securities] --> B[Tranche 1: Low Risk]
	    A --> C[Tranche 2: Medium Risk]
	    A --> D[Tranche 3: High Risk]
	
	    B --> E[Investors seeking stability]
	    C --> F[Investors seeking balance]
	    D --> G[Investors ready for risks]

## What does the term 'tranche' mean? - [ ] An all-you-can-eat buffet - [x] A slice or portion of pooled securities - [ ] A French dessert - [ ] A type of stock market crash > **Explanation:** A tranche is indeed a slice of financial securities, and I promise it’s less messy than any buffet! ## Why do investors buy different tranches? - [ ] To confuse themselves - [x] To align with their risk preference - [ ] Because they want to try every slice - [ ] They just like the way it sounds > **Explanation:** Investors choose tranches based on their appetites for risk—it's about enjoying your investment experience, not just filling your plate! ## Which type of security commonly uses tranches? - [x] Mortgage-backed securities - [ ] Single stock - [ ] Physical gold bars - [ ] Pegged currency > **Explanation:** Mortgage-backed securities often use tranches to cater to various levels of investors, unlike gold which just lingers there looking shiny! ## What happens if a tranche defaults? - [ ] Everyone loses their money - [ ] The sky falls - [x] Lower-ranked tranches take hits first - [ ] Tranches magically disappear! > **Explanation:** In the case of default, lower-ranked tranches usually bear the brunt before affecting higher ones, much like how your snacks vanish first at a party! ## Are tranches available for investor preference? - [x] Yes, they can be tailored to different risks - [ ] No, everything is the same - [ ] Only if you whisper sweet nothings to your broker - [ ] Only from certain pizza places... > **Explanation:** Yes! Tranches are specifically designed to cater to different investor profiles, making them far more versatile than that pizza! ## How do tranches provide diversification? - [ ] They come in different colors. - [x] They appeal to investors with varying risk tolerances. - [ ] Each tranche wins a medal! - [ ] They offer a free appetizer. > **Explanation:** Different tranches appeal to various risk appetites, creating a smorgasbord of options for investors! ## Are tranches standardized across the market? - [ ] Yes, every tranche is the same - [ ] Only the ones on Wednesdays! - [x] No, they can vary by issuer and structure. - [ ] Yes, they have matching outfits. > **Explanation:** Tranches can significantly vary depending on the issuer and their structure, making every tranche a unique addition to the investor's plate! ## What does "CDO" stand for in relation to tranches? - [x] Collateralized Debt Obligation - [ ] Certified Debt Officer - [ ] Ceiling Development Order - [ ] Comprehensive Dining Option > **Explanation:** CDO stands for Collateralized Debt Obligation - would you like a seat at our table for more investment options? ## Which risk level do 'junior tranches' generally carry? - [ ] Very low - [x] Higher - [ ] None, they just hang out - [ ] Only on Tuesdays! > **Explanation:** Junior tranches typically take on higher risks, but that's why they can also promise higher rewards! ## What is the primary appeal of creating tranches from securities? - [ ] To mystify investors - [x] To cater to a variety of investor preferences - [ ] To create complex flavors - [ ] To make finance more exciting! > **Explanation:** The main reason is indeed to cater to a variety of risk appetites, not just to keep it exciting – although that’s a welcomed bonus!