A Credit Default Swap has the following attributes: I. Is basically an insurance policy for an asset II. Can be bought whether or not you own the asset II. Were one of the major reasons the financial markets collapsed in 2007 IV. Are now regulated O A. I & II O B. II & III O C.II & IV D. I,II,II & IV

Q: 21 Which one of the following best describes the purpose of derivatives markets? Multiple Choice…

A: In this question, we are required to determine the primary purpose of derivative contract.Derivative…

Q: All of the following are securities except: 1. Gold futures II. Options on currencies III. Mortgage…

A: In financial markets, the term "securities" typically refers to tradable financial assets that have…

Q: Banks can hedge the credit risk of their mortgage loans by buying credit default swaps. (Think about…

A: The risk or uncertainty that is present in an investment transaction that the investee will not…

Q: The definitions of default events are fairly standard, but what really constitutes a default? a. The…

A: Default refers to the failure to comply with the agreed terms of the agreement that the involved…

Q: An insurance company makes long-term loans with variable interest rates. It funds the loans by…

A: The explanation is briefly described in step 2

Q: Question 9 The credit risk of investing in bonds is also known as: A seesaw wffect B) default risk…

A: Credit risk is the risk that the issuer of bonds will not be able to meet its financial obligations…

Q: The penalty for spending before earning is the int . Ceteris paribus, as the frequency of compoundin…

A: Interest rates will reduce company activity since borrowing money would become more expensive. -…

Q: On June 30, 2023, Pharoah Limited issued $3 million of 20-year, 13% bonds for $3,225,689, which…

A: Bonds :Bonds is a long-term debts issued by the government and companies to raise funds for their…

Q: Explain what credit default swap is and how CDS's can be used by financial institutions such as…

A: Swap is defined as the derivative contract by which the parties (two) used to exchange the cash…

Q: Which statement describes the concept of cherry-picking? O Selling debt securities that go up in…

A: Cherry-picking refers to selectively choosing and exploiting favorable options while neglecting less…

Q: Q8   Which of the following bonds carry significant risk that the issuer will not make current or…

A: Solution: Bonds are a type of security issued by companies which pay a fixed amount of interest at…

Q: are in essence an insurance contract against the default of one or more borrowers. O Credit default…

A: An insurance contract is a legal agreement between an insurance company (insurer) and an individual…

Q: O A. NAV will always be $1.00

A: A money market mutual fund invests in short-term debt instruments, cash, and cash equivalents that…

Q: 17 - Leading up to the 2007-2009 Financial Crisis, the bundling of smaller loans (like mortgages)…

A: Financial crisis of 2007-2009 was related to the credit or debt transactions which affected the…

Q: Imagine that the table above outlines deposits rates. Assuming A wants a fixed rate deposit and B…

A: There are two companies A wants a fixed rate deposit and B wants floating rate deposit, comparative…

Q: (1) What does it mean to amortize a bond premium or discount? Why is it necessary?

A: Hi student Since there are multiple questions, we will answer only first question.

Q: Which of the following are reasons that the actual prepayment rate on a specific mortgage pool…

A: PSA (Public Securities Association Standard Prepayment Model) is referred to as an assumed monthly…

Q: Why is the rate of Fixed Rate Mortgage higher than Adjustable Rate Mortgage? O Liquidity risk…

A: The difference between Fixed rate mortgage and Adjustable rate mortgages is the interest rate risk…

Q: 16. Euro credits a. are short-term and medium-term loans are denominated b. are extended by banks in…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Is the analyst's firm likely to be buying or selling credit default swaps on a distressed firm? OA.…

A: A CDS is a Credit Default Swap. This a derivative instrument where the buyer of the CDS gets…

Q: 7- which of the statements given below is true? Please select one; a) every financial market allows…

A: Financial market refers to the place where short-term and long-term securities are traded. It can be…

Q: A bond payable in a currency different from that of the country in which it is issued is known as a

A: Junk Bond: It refers to the bond that has a low credit rating given by the rating agency. The…

Swaps

A swap is a derivative contract in which two parties are agreed to exchange their cash flows from two different financial instruments for a defined period. In swap contracts, cash flows from one financial instrument are fixed and cash flow from other financial instruments is variable based on the interest rate, exchange rate, and commodity price. Swap contracts are transacted in an over-the-counter system. Swap contracts are utilized to hedge risk and mitigate loss.