Credit Default Swaps

question 121

Multiple Choice

Credit default swaps

• A) are a type of collateralized debt obligation.
• B) are a type of insurance against defaults.
• C) were accurately priced before the housing market collapsed.
• D) made AIG the most profitable company in the United States.

---

Definitions:

Fixed Expenses

Costs that do not change with the level of output or sales in the short term, such as rent or salaries.

Break-even Point

The production level at which total revenues equal total expenses, resulting in no profit or loss.

Unit Contribution Margin

Unit contribution margin refers to the difference between the selling price per unit and the variable cost per unit, highlighting the profitability of individual items.

Net Income

A company's overall earnings following the deduction of all expenses and taxes from its gross revenue.