The Introduction of ________ Vehicles, Such as Cash CDOs and Credit

question 67

Multiple Choice

The introduction of ________ vehicles, such as cash CDOs and credit derivatives that are employed to create synthetic CDOs, has elicited the same cautious response from overseers of the global banking system.

• A) old credit risk transfer
• B) new default risk transport
• C) new cask risk transfer
• D) new credit risk transfer

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the fixed versus variable costs structure of a business.

Financial Leverage

A technique employed by companies to increase their market value and return on investment by using debt to finance its operations.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability calculated by excluding interest and income tax expenses.

Breakeven Diagrams

Graphical representations that show the point at which total costs and total revenue are equal, indicating no net loss or gain.