Assume a U

question 1

Multiple Choice

Assume a U.S. savings institution funds its fixed-rate mortgages by attracting short-term deposits. If it engages in an interest rate swap, but the index on the swap does not move in perfect tandem with its cost of deposits, this reflects

• A)sovereign risk.
• B)basis risk.
• C)credit risk.
• D)None of these are correct.

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Definitions:

Unearned Legal Fees

Money received by an entity for legal services yet to be performed, recognized as a liability until the services are rendered.

Adjusting Entry

A journal entry made at the end of an accounting period to update the ledger accounts for accruals, deferrals, and other adjustments necessary to ensure accurate financial reports.

Revenue Account

A revenue account tracks the income generated from a company's primary operations, such as sales of goods and services, during an accounting period.

Unearned Management Fees

Income received by a business for services that have not yet been rendered, considered a liability until the service is provided.