As a financial adviser on Interest rate swaps, identify the statement that best describes an interest rate swap to your clients, Jade Exports Ltd. (JE) and RO investments (RO). a.JE and RO swap their obligations to make debt repayments to their respective lenders. b.JE and RO exchange their respective interes payments associated with existing debts. c.JE and RO exchange the principal and associated interest payments associated with the debts. d.JE and RO swap their original debt commitments.

As a financial adviser on Interest rate swaps, identify the statement that best describes an interest rate swap to your clients, Jade Exports Ltd. (JE) and RO investments (RO). a.JE and RO swap their obligations to make debt repayments to their respective lenders. b.JE and RO exchange their respective interes payments associated with existing debts. c.JE and RO exchange the principal and associated interest payments associated with the debts. d.JE and RO swap their original debt commitments.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Describe a credit default swap and its purpose. Note the rationale for the protection buyer and the protection seller and the cash flow between the two parties. Describe four key credit events that would trigger payment under a credit default swap.
Interest-rate swaps are: Answer a. Exchanges of equity securities for debt securities b. Agreements involving swapping of options contracts c. Agreements that allow both parties to convert floating interest rates to fixed interest rates. d. Agreements between two parties to exchange periodic interest-rate payments over some future period
a)explain current credit risk and potential credit risk. b)describe the primary methods of managing derivative credit risk. c)explain what is meant by netting, and discuss various forms of netting. d)define credit derivatives. e) describe the four primary types of credit derivatives: total return swap, credit swap/credit default swap, credit spread option, credit-linked security
In an interest rate swap borrower pays O a. Premium O b. Coupon cashflows O c. Repayment cashflows Od. Discount to cashflows
A contractual agreement in which the borrower receives something of value now and agrees to pay the lender in the future with an interest is called as. a. Credit b. Insurance c. Money d. Time
Classify the following items as (1) on-balance-sheet assets, (2) on-balance sheet liabilities, (3) offbalance-sheet assets, (4) off-balance-sheet liabilities, or (5) capital account. • Loan commitments. • Loan loss reserves. • Letter of credit. • Bankers acceptance. • Rediscounted bankers acceptance. • Loan sales without recourse. • Loan sales with recourse. • Forward contracts to purchase. • Forward contracts to sell. • Swaps. • Loan participations. • Securities borrowed. • Securities lent. • Loss adjustment expense account (PC insurers). • Net policy reserves
Identify which of the following instrumets are used for hedging receivables Forex Borrowing Choose..V Choose... No Yes Choose... Spot Contract Futures Contract, Option contract Choose... Forward Contract Choose... Forex Lending Choose...
In hedging, interest rate swap (IRS) can be used to hedge against rising rates, falling rates, manage asset-liability durationgaps, protecting revenue and lock-in cost of borrowing. True/False
Credit scoring is a process used to Multiple Choice determine what interest rate to charge a borrower, based on risk considerations. determine the amortization period for a term loan, based on risk considerations. calculate a borrower's return on equity. calculate a borrower's leverage position.
________ are, in essence, an insurance contract against the default of one or more borrowers. A) Credit default swaps B) CMOs C) ETFs D) Collateralized debt obligations E) All of the options Also state why chose the answer.
The Interest rate on which of the following is the LIBOR? a.Banker's acceptances b.Repurchase agreement c.Certificate of Deposits d.Eurodollar CD
Toms UI IVesuTment to ychciut ed as a cost of borrowing to compensate the opportunity costs of the bank with I to the cash loaned to you. Moreover, the interest rate is usually expressed as nual percentage rate. activity ctions: On the space provided, write TRUE if the idea being expressed is correct and FALSE if otherwise. 1. In the most loan amortization schedules, amortization of discount or premium of the loan increases over time. 2. The process of obtaining future values is called discounting. 3. An annuity in which cash flows occur at the end of each period is called annuity. age

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