hard · Asset-Backed Securities
A credit card master trust issues 'Series 2026-1' with a three-year revolving period. During this period, the monthly principal collections from cardholders are not distributed to bondholders.
How is this principal cash flow utilized by the trust?
- It is used to purchase new receivables from the seller to maintain the invested amount.
- It is distributed to the AAA class as a partial early redemption.
- It is held in a non-interest-bearing reserve account until the final maturity date.
- It is applied to pay down the seller's interest until it reaches zero.
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