Which of the Following Is False in Case of Credit

question 38

Multiple Choice

Which of the following is false in case of credit enhancements?

• A) It reduces the default risk of the borrowing entity for the lender, thereby deteriorating the overall credit worthiness of the borrower
• B) Credit enhancement could be implicit or explicit
• C) Credit enhancement is a mechanism whereby external cash flows is extended by an entity which has a stringer credit profile, so that it benefits the fund raising entity

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