Credit Spread Call Options Are Useful Because

question 23

Multiple Choice

Credit spread call options are useful because

• A)its value increases as the risk premium on a specified benchmark bond of the borrower increases above some exercise spread.
• B)an increase in the value of the call option will tend to offset the decreasing value of an FI's loan and net worth as the credit quality of the borrower decreases.
• C)they will always cause a loss at least equal to the required premium on the option.
• D)All of the above.
• E)Answers A and B only.

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Expenditures on goods and services by government at all levels, excluding transfer payments.

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The total value of all goods and services produced in an economy during a specific time period.

Government Purchases

Involves spending by the government on goods and services that directly contribute to the economy's aggregate demand.

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Real Gross Domestic Product, which is the inflation-adjusted measure of the total value of all goods and services produced within a certain time frame.