A Credit Forward Is a Forward Agreement That

question 117

Multiple Choice

A credit forward is a forward agreement that

• A)hedges against a decrease in default risk on a loan after the loan rate is determined and the loan issued.
• B)hedges against an increase in default risk on a loan before the loan rate is determined and the loan issued.
• C)hedges against an increase in default risk on a loan after the loan rate is determined and the loan issued.
• D)hedges against a decrease in default risk on a loan before the loan rate is determined and the loan issued.
• E)hedges against an increase in default risk on a loan after the loan rate is determined and before the loan is issued.

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Definitions:

Method of Substitution

A strategy for solving systems of equations by replacing variables with equivalent expressions to simplify the system.

System of Equations

A set of two or more equations with the same variables.

Method of Elimination

A technique used in solving systems of equations where one variable is eliminated by adding or subtracting the equations.

System of Equations

A set of two or more equations with the same variables, solved together to find common solutions.