In a Troubled Debt Restructuring That Involves Only a Modification

question 97

Multiple Choice

In a troubled debt restructuring that involves only a modification of terms, if the amount to be repaid is greater than the current carrying value of the liability

• A)no gain or loss would be recognized by the debtor
• B)an ordinary gain would be recognized by the debtor
• C)a prior period adjustment would be recognized by the debtor
• D)an ordinary loss would be recognized by the debtor

---

Definitions:

Long Calls

An option strategy involving the purchase of call options, giving the buyer the right, but not the obligation, to purchase a security at a specified price within a certain time frame.

Delta

In finance, a measure of the sensitivity of an option's price to a change in the price of the underlying asset, indicating how much the price of the option is expected to move based on a $1 change in the underlying asset.

Underlying Asset

The financial asset upon which a derivative's price is based, such as stocks, bonds, commodities, or currencies.

Hedge Ratio

The proportion of a position which is hedged, representing a strategy to minimize the risk of adverse price movements in an asset.