Which of the Following Statements Best Describe a Derivative Contract

question 74

Multiple Choice

Which of the following statements best describe a derivative contract?

• A)Contractual commitments to make a loan up to a stated amount at a given interest rate in the future.
• B)Contingent guarantees sold by an FI to underwrite the performance of the buyer of the guaranty.
• C)Agreement between two parties to exchange a standard quantity of an asset at a predetermined price at a specified date in the future.
• D)Trading in securities prior to their actual issue.
• E)Loans originated by an FI and then sold to other investors with recourse.

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Definitions:

Secured Interest

A legal claim or lien on assets or property, granted to a lender as security for the repayment of a debt, giving the lender rights to the collateral if the debt is not repaid.

Commercially Reasonable

A standard in law and business that measures actions against what a reasonable person engaged in commerce would believe is acceptable or customary practice.

Repossessed Vehicle

A vehicle taken back by a lender or seller from the buyer due to failure to make agreed payments.

Deficiency

The difference between the amount owed on a loan and the proceeds from the sale of the asset securing the loan, if the sale amount does not cover the loan balance.