A financial guarantee contract is initially recognized (i) The premium received (ii) Fair value (iii) The higher of premium or expected credit loss (iv) The guaranteed amount

Provide answer

_____ is a contract that involves compensation for specific potential future losses in exchange for periodic payments and that provides for the transfer of the risk of a loss, from one entity to another, in exchange for a premium. a.Spot contract b.Insurance c.Hedging d. Forward contract

Counterparty credit risk is a function of the probability of default, exposure at default, and loss given default. Assuming that the individual exposure at default with a counterparty is fixed, which of the following statements is correct?   A. The probability of default can be mitigated by collateral, and exposure at default can be mitigated by netting.   B. The probability of default can be mitigated by netting, and exposure at default can be mitigated by collateral.   C. Loss given default can be mitigated by collateral, and exposure at default can be mitigated by netting.   D. Loss given default can be mitigated by netting, and exposure at default can be mitigated by collateral.

A funding component is O the total funding required for a specified decision point O a long-term source of capital O a collateral agreement, such as pledging an asset as security for a mortgage bond O an ancillary requirement on a loan that affects its risk, such as a restrictive covenant

Loans and receivable should be measured subsequent to initial recognition at *   a. Amortized cost using the straight line method b. Fair value c. Fair value plus transaction cost d. Amortized cost using the effective interest method

Contingent liabilities are obligations that may or may not materialize.

The indenture is a contract between the issuer and lenders that does all the following EXCEPT ______.   a. specify the manner in which the principal must be repaid   b. give management's expectations about return of the proceeds   c. list any restrictive covenants   d. detail the nature of the debt issue

An obligation that is contingent on the occurrence of a future event should be reported in the statement of financial position as a liability if: a. The amount of the obligation can be reasonably estimated. b. The future event is likely to occur. c. The occurrence of the future event is at least reasonably possible and the amount is known d. The occurrence of the future event is probable and the amount can be reasonably estimated.

For most long-term liabilities, an important consideration is that they are properly authorized. True or False?