Which One of the Following Is a Security That Only

question 47

Multiple Choice

Which one of the following is a security that only pays the principal cash flows to investors?

• A)split strip
• B)interest-only strip
• C)amortized strip
• D)principal-only strip
• E)final strip

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Definitions:

Foreign Taxes Paid

This represents taxes paid to foreign governments on income earned outside of the taxpayer’s country of residence, often creditable against domestic taxes in the taxpayer’s home country to avoid double taxation.

Deferred Tax Liability

An accounting term that refers to a tax due in the future for income that has already been recognized in the financial statements.

Effective Tax Rate

The average rate at which an individual or a corporation is taxed, calculated by dividing the total amount of taxes paid by the taxable income.

Temporary Difference

A difference that arises between the tax base of an asset or liability and its carrying amount in the financial statements, which will result in taxable or deductible amounts in future years.