Question 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

Explanation:According to IFRS 9 (Financial Instruments), a financial guarantee contract is initially…

Answered: A financial guarantee contract is…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter16: Financially Troubled Ventures: Turnaround Opportunities?

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A financial guarantee contract is initiatially recognized at
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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
For most long-term liabilities, an important consideration is that they are properly authorized. True or False?
(7).
A guarantee issued by an FI that obligates the FI to pay if the purchaser of the letter defaults on a debt is called a a. loan commitment. b. forward rate agreement. c. credit swap agreement. d. collar. e. None of these options are correct.

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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