In a One-Year Forward Contract on a CDS That Will

question 8

Multiple Choice

In a one-year forward contract on a CDS that will last five years,what usually happens if there is a default during the first year?

• A) There is a payoff to the forward protection buyer at the time of default
• B) There is a payoff to the forward protection buyer at the end of one year
• C) There is a payoff to the forward protection buyer at the end of six years
• D) The contract ceases to exist

Comprehend the implications of government budget deficits on the economy.

Grasp factors affecting a firm’s sensitivity to the business cycle, including financial and operating leverage, and product type.

Recognize how various economic conditions influence investment decisions in different industries.

Understand the effects of macroeconomic shocks, such as oil price changes, on the economy.

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Definitions:

Shortage Costs

Costs incurred as a result of insufficient inventory, including potential lost sales, backorder handling, and decreased customer satisfaction.

Carrying Costs

The total cost of holding inventory, including storage, maintenance, insurance, and opportunity costs.

Opportunity Cost

The foregone benefit that could have been obtained from an option not chosen.

Inventory Holding

The costs associated with storing unsold goods, including warehousing, insurance, and depreciation.