A Haircut of 20% Means That

question 15

Multiple Choice

A haircut of 20% means that

• A) A bond with a market value of $100 is considered to be worth $80 when used to satisfy a collateral request
• B) A bond with a face value of $100 is considered to be worth $80 when used to satisfy a collateral request
• C) A bond with a market value of $100 is considered to be worth $83.3 when used to satisfy a collateral request
• D) A bond with a face value of $100 is considered to be worth $83.3 when used to satisfy a collateral request

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Definitions:

Straight-Line Methods

Straight-line methods are used in accounting to allocate the cost of an asset evenly over its useful life for the purposes of depreciation.