A Credit Card Receivable Is a Nonamortizing Asset and Therefore

question 48

Multiple Choice

A credit card receivable is a nonamortizing asset and therefore has a revolving structure. In regards to the lockout period, which of the below statements is FALSE?

• A) During the lockout period the principal payments made by credit card borrowers comprising the pool are retained by the trustee and reinvested in additional receivables to maintain the size of the pool.
• B) The lockout period can vary from 18 months to 10 years.
• C) During the lockout period, the cash flow that is paid out to the bond classes is based on finance charges collected and fees.
• D) The lockout period is followed by the principal amortization period, when the interest is no longer reinvested but paid to bondholders.

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Definitions:

Performance Management

A systematic process by which an organization involves its employees in improving organizational effectiveness and achieving company objectives through a framework that includes goal setting, feedback, and performance evaluation.

Activities and Outputs

Refers to the tasks performed and the results achieved or produced in a work or project environment.

Feedback

The process of giving constructive information to individuals or teams regarding their performance and behavior to encourage improvement.

Distributional Errors

Mistakes made in performance appraisals where an evaluator's rating of an employee is biased towards certain ratings across the spectrum.