Credit Default Swaps ________

question 88

Multiple Choice

Credit default swaps ________.

• A) provide payments to holders of bonds if they default
• B) decrease asymmetric information in the mortgage markets
• C) had strong incentives to make sure CDO holders would be paid off
• D) were only a small part of insurance companies portfolios

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Definitions:

Target Capital Structure

The mix of debt, equity, and other securities that a company aims to hold to finance its operations and growth.

Capital Budget

The amount of money allocated for significant long-term investments or projects of a business.

Dividend Payment

A disbursement of a portion of a company's earnings decided by the board of directors to its shareholders.

Residual Dividend Policy

A strategy where dividends are paid to shareholders from the leftover or residual earnings after all operational and expansion costs are covered.