One Difference Between a Special Purpose Vehicle (SPV) and a Structured

question 85

Multiple Choice

One difference between a special purpose vehicle (SPV) and a structured investment vehicle (SIV) is

• A)there is no difference; these are just two different names for the same type of subsidiary.
• B)the SPV has stockholders that share in the profits; the SIV only has debt.
• C)the SIV ceases to exist when the loans in its portfolio cease to exist; the SPV outlives its loan portfolio.
• D)the SPV is allowed to accept deposits while the SIV must rely solely on other borrowings.
• E)the SIV raises funds first and then acquires loans from the sponsoring FI; the SPV receives the loans first and creates an asset-backed security which it sells and transfers the funds back to the sponsoring FI.

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Definitions:

NPV

Net Present Value; a financial metric used to evaluate the profitability of an investment, calculating the difference between the present value of cash inflows and outflows over a period of time.

Interest Rates

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis, known as the annual percentage rate (APR).

After-Tax Annual Interest Savings

The amount of money saved annually on interest payments after accounting for the effects of taxes, often referenced in discussions of debt refinancing or consolidation.

Refunding

The process of replacing an existing debt with a new debt, often to take advantage of more favorable borrowing terms.