Discuss the risks posed by credit derivative contracts and standby letter of credit.

Q: Define the term Deferred Loan Repayments?

A: Answer: A deferred loan payment is nothing but a loan agreement in which the borrower may start…

Q: Discuss how the national credit act treats reckless trading

A: Nationnal Credit Act:- It is an Act for all consumers who seeks credit in market palace. this act…

Q: State the accounting guidelines for derivative financial instruments.

A: Derivative: Derivative is a financial instrument whose value is derived from the underlying…

Q: How an Ijarah contract is different from an installment-based credit sale?

A: Ijarah denotes a contract where one party transfers the right to use an item he owns to another…

Q: What are credit derivatives, and how do they operate?

A: Derivative instrument is the financila instrument which derive its value form the underlying asset.

Q: How can swaps be used to reduce the risks associated with debt contracts?

A: Swap is a financial contract through which two parties exchange the cash flows associated with their…

Q: Explain Options to Report Liabilities at Fair Value.

A: Introduction FASB introduces Fair Value Options to report assets and liabilities in fair value,…

Q: With example, differentiate between a physical settlement and a cash settlement in the derivatives…

A: A derivative market is a financial market in which financial derivatives such as futures contracts,…

Q: Describe the uses of and accounting for derivatives

A: Accounting for derivatives: It is a method of recording a derivative holding of a company’s balance…

Q: Define secured basis loan

A: Introduction: Loan is the amount that investors borrow for a given period of time. Farmers pay a set…

Q: Describe some ways to manage credit risk at a nonfinancialcompany

A: Evaluation of the customer prior to granting credit. Nonfinancial Company does self-evaluation or…

Q: In hedging, interest rate swap (IRS) can be used to hedge against rising rates, falling rates,…

A: to understand the topic better, the interest rate swap is defined as the contract between any two or…

Q: what is the difference between unsecured and secured transactions in terms of default

A: These types of transactions are based on the creditworthiness. These are loan or other credit…

Q: Choose True or False: [T / F] Through credit derivatives, a firm can separate the credit risk…

A: Credit derivates is that financial contract that allows creditors to transfer to third party in case…

Q: Describe disclosure requirements for derivatives and risk.

A: As per FAS 161- Please see below : Disclosures to be made in the footnotes for derivatives- An…

Q: loan portfolio audit

A: Loan Portfolio Audit-:A Loan Portfolio Audit furnishes an organized, in-depth investigation of…

Q: Credit-rating agency ratings are associated with which of the following investor risks? interest…

A: Credit rating ageencies like S&P and Moody's are involved in analyzing the balance sheet and…

Q: What tools are available for solving adverse selection and moral hazard problems in debt contracts…

A: There may arise various problems like adverse selection and moral hazards problem in equity and debt…

Q: What is meant by a term-loan agreement?

A: A Loan Agreement, also known as a term loan, demand loan, or loan contract. It basically is a legal…

Q: What is the difference between interest rate risk and default risk? How do combinations of terms in…

A: Interest rate risk is the risk of an investment due to changes in interest rate. When market rates…

Q: What is “imputed interest”? In what situations is it necessary to impute an interest rate for notes…

A: Imputed Interest: According to the Internal Revenue Service (IRS), an imputed interest is an…

Q: Explain how to account for the impairment of held-to-maturity debt security.

A: Held to maturity securities are those securities which are purchased to be held till maturity…

Q: What are some types of credit derivatives?

A: A credit derivative is a type of financial contract where credit assets are kept as an underlying…

Q: How to define credit risk and how to limit that risk.

A: Business provide credit to customers to encourage buying more So payment are paid by customers on…

Q: What is the relationship between provisions, onerous contracts, contingent liabilities and other…

A: The book in which the company records all its transactions initially is termed as journal book. From…

Q: Discuss the sanctions associated with issue of dud cheques

A: Dud cheque is the cheque which is worth nothing because the person who wrote the cheque it does not…

Q: What are Various Types of Derivative Instruments? How Derivative Instruments work in Financial…

A: Derivative is a type of financial instrument that derives its value from the underlying asset. The…

Q: Describe how the matching principle applies to contingent liabilities (hint: warranties).

A: Introduction:- Contingent liability may or may not occurred in the future. Matching principles…

Q: Differentiate between interest rate risk and default risk and explain how combinations of terms in…

A: A mortgage is a loan agreement between a bank and a borrower, in which a borrower borrows a specific…

Q: What is the difference between fully secured liabilities, partially secured liabilities, and…

A: Liabilities: The claims creditors have over assets or resources of a company are referred to as…

Q: What is trade-off credit and collection policies and its compositions?

A: A external financing is an agreement agreement understanding between partners that facilitates the…

Q: Briefly describe the concepts of; Letter of credit, trade deficit, negotiable instrument and credit.

A: Letter of credit is a financial instrument that is used as a mode of payment specifically for…

Q: A credit derivative allows creditors and debtors to _________ their exposure to credit risk. For…

A: A credit derivative is a financial contract that allows the parties to minimize their exposure to…

Q: What are the main distinctions between a traditional financialinstrument and a derivative financial…

A: