Which of the Below Statements Is FALSE

question 16

Multiple Choice

Which of the below statements is FALSE?

• A) The Federal Reserve imposes no limit on the amount of eligible bankers acceptances that may be issued by a bank.
• B) An accepting bank that has decided to retain a bankers acceptance in its portfolio may be able to use it as collateral for a loan at the discount window of the Federal Reserve.
• C) The Federal Reserve imposes a reserve requirement on funds raised via bankers acceptances that are ineligible.
• D) Investing in bankers acceptances exposes the investor to credit risk.

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Definitions:

Reported Earnings

Reported earnings refer to the net income of a company as stated in its income statement, in compliance with the relevant accounting standards.

Seizure of Collateral

The act of a lender taking possession of the collateral pledged against a loan in the event of default by the borrower.

Breach of Covenant

The violation of a term or condition set in a contractual agreement or bond covenant.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell shares of a stock at a specified price within a specified time period.