In Addition to Uncertainty About the Timing and Amount of the Cash

question 5

True/False

In addition to uncertainty about the timing and amount of the cash outlays, and the potential for the depositor or policyholder to withdraw cash early or borrow against a policy, a financial institution has to be concerned with possible reduction in cash inflows.

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Definitions:

Goodwill

An intangible asset representing the excess of the purchase price over the fair market value of an acquired company's identifiable net assets, reflecting the value of its brand, customer relationships, and other non-physical assets.

Fair Value

The amount one would expect to obtain from selling an asset or the cost to transfer a liability in a smooth transaction among market players as of the valuation date.

Tax Rate

The percentage at which an individual or corporation is taxed by the government.

Preference Shares

A type of stock that provides holders with priority over common stockholders in the distribution of dividends and assets upon liquidation.