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Which of the following statements regarding collateralized debt obligations (CDOs) is least accurate? A. A balance sheet CDO is created by a firm seeking to reduce its loan exposure. B. An arbitrage CDO refers to one created to profit from the spread between the rate earned on the underlying debt obligations and the rate promised to the CDO buyers. C. In order to create a CDO, the issuer packages a series of debt instruments and splits the package into several tranches. D. CDO tranches typically have a higher credit rating than the average rating of the debt instruments in the underlying pool. |