Which of the Following Statements Is True

question 20

Multiple Choice

Which of the following statements is true?

• A)Potential exposure refers to the cost of replacing a derivative securities contract at today's prices.
• B)Current exposure refers to the cost of replacing a derivative securities contract at today's prices.
• C)Current exposure refers to the cost of replacing a derivative securities contract at the contract's maturity.
• D)Potential exposure refers to the cost of replacing a derivative securities contract at the contract's maturity.

---

Definitions:

Income Before Income Taxes

The profit a company has generated before accounting for income tax expenses, often found on the income statement.

Times Interest Earned Ratio

A financial metric that measures a company's ability to cover its interest obligations with its earnings before interest and taxes (EBIT).

Potential Drop

An anticipated decrease in value or performance, often used in the context of stocks or electrical voltage.

Earnings

The profit a company generates during a particular period, often used as a measure of its financial performance.