A Digital Default Option

question 9

Multiple Choice

A digital default option

• A)always pays the par value of a loan if exercised.
• B)has a payout that is capped at 80 percent of the par value of the loan.
• C)will cause the FI never to lose more than the premium paid to purchase the option.
• D)always pays the par value of a loan if exercised and will cause the FI never to lose more than the premium paid to purchase the option.
• E)always pays the par value of a loan if exercised and has a payout that is capped at 80 percent of the par value of the loan.

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Definitions:

User-Defined

User-defined refers to features, functions, or elements customized or defined by the user, offering flexibility to tailor systems or applications to specific needs or preferences.

Module-Defined

A characteristic or feature that is specified or determined by a particular module in a software system or hardware device.

Predefined

Refers to something that has been defined or set in advance before being used or implemented.

Fault Routine

A predefined sequence of actions in control systems that is executed when an error or fault condition is detected.