If One Party Pays a Fixed Fee on a Regular

question 67

Multiple Choice

If one party pays a fixed fee on a regular basis in return for a contingent payment that is triggered by a downgrading of a firm's credit rating,that is called a

• A)credit option.
• B)credit swap.
• C)credit-linked note.
• D)credit default swap.

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Definitions:

Tax Deductible

Expenses that can be subtracted from gross income to reduce the taxable income.

Warranty Liability

An obligation reported on a company's balance sheet that represents the estimated costs of fulfilling the terms of warranties offered on products sold.

Deferred Tax

The amount of income tax payable/recoverable in future reporting periods in respect of temporary differences and tax losses.

Balance Date

The date on which a company's financial year ends and financial statements are prepared to reflect the company's financial position.