Which of the following securities is likely to have the most credit risk? Commercial paper b A high yield (junk)bond C Collateralized mortgage bond consisting of 50% sub-prime mortgages d There is not enough information to decide between A, B and C.

The correct answer is option C: Collateralized mortgage bond consisting of 50% sub-prime mortgages.<br /><br />Credit risk refers to the risk that a borrower will default on their debt obligations, resulting in a loss for the lender or investor. Among the options provided, the collateralized mortgage bond consisting of 50% sub-prime mortgages is likely to have the most credit risk.<br /><br />Sub-prime mortgages are loans made to borrowers with lower credit scores and higher risk of default. These borrowers are considered to be higher-risk borrowers and are typically charged higher interest rates to compensate for the increased risk. When these mortgages are bundled into a collateralized mortgage bond, the overall credit risk of the bond increases due to the higher default risk associated with the sub-prime mortgages.<br /><br />Commercial paper, on the other hand, is a short-term debt instrument issued by corporations to meet their immediate financing needs. It is typically considered to have lower credit risk compared to bonds, as it has a shorter maturity period and is often backed by collateral.<br /><br />High yield (junk) bonds are bonds that carry a higher risk of default compared to investment-grade bonds. While they offer higher yields to compensate for the increased risk, they still have lower credit risk compared to a collateralized mortgage bond consisting of 50% sub-prime mortgages.<br /><br />Therefore, among the options provided, the collateralized mortgage bond consisting of 50% sub-prime mortgages is likely to have the most credit risk.