A Credit Default Swap Is

question 9

Multiple Choice

A credit default swap is

• A) insurance on a debt contract.
• B) not relevant for holders of mortgage backed securities.
• C) a primary function of financial intermediaries.
• D) a claim to the payoffs on a portfolio of mortgages.
• E) insurance for consumers against the risk of defaulting on their mortgages.

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Definitions:

Double-Declining-Balance

A method of accelerated depreciation which doubles the normal depreciation rate.

Scrap Value

An estimated calculation of what an asset will be worth at the time it is sold, after it is no longer useful.

Sum-Of-The-Years-Digits

An accelerated method of depreciation which totals the digits of an asset's useful life and allocates the cost based on a fraction of those digits.

Scrap Value

The calculated resale value of an asset at the termination of its functional life.